What’s the best place to get a business loan?

Banks and building societies closed to businessesIf you’re in need of working capital, you know the frustration that can arise from trying to secure a business loan from a bank or building society.

The availability of credit has gone down by a substantial margin since the banking crisis and resultant economic downturn – a recession that has been stubbornly hanging on for much longer than it needs to. This means that banks, building societies, and other lenders have become incredibly reticent to agree to any lending whatsoever, as they husband their capital in fears of more bank failures in the future, which may protect the banks themselves from ruin but does little to help anyone who needs business loans, mortgages, or any other type of financial products, so how do you find a lender that will actually provide you with the funds you need to grow your business?

The Bank of England to the rescue?

The Government knows how hard it is to get a business loan in the current economic climate – and believe it or not, it cares about small business owners, considering they’re one of the primary drivers of economic recovery. That makes it a priority for the Government to encourage banks and building societies to actually start lending once more to businesses that need the capital, and many steps have been taken in order to act as that encouragement.

Granted not every attempt on the part of the Government has been successful, such as last year’s Project Merlin, which saw the small business lending targets set by the Government unmet by and large by banks and building societies. However, the Bank of England has come forward with a new scheme recently entitled Funding for Lending, which takes a much more direct approach of offering low-cost wholesale funds to lenders, provided they agree to pass the savings on to both firms and home buyers in the form of business loans and mortgages with low interest rates – the scheme is new, but shows promise, so a business looking for a low-cost loan can find one of the banks or building societies that has agreed to the Funding for Lending scheme to get a good deal.

If all else fails, abandon High Street

There’s been another growing trend when it comes to small business lending, and for once it doesn’t involve going to High Street with your hat in your hand, only to be sent running with your tail between your legs when lender after lender rejects your application for credit. Instead, there have been many seeking out alternative forms of capital, and with mixed results, but one of the most successful new sources has been from the peer-to-peer lending sector.

Peer-to-peer lending does exactly what it says on the tin in that it connects businesses in need of funding with lenders looking to make a direct impact on the economy. Peer-to-peer lending offers something for everyone in that the interest rates on loans taken out in this manner are often much less expensive than a traditional loan, while the interest a lender earns in return will be far and above what they could earn with a traditional savings account, so everyone wins.

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