Personal Vs Business Loans

[Freakbro]

Just making enquiries about a small business loan and the cheapest it seems to be is about 8% APR variable (was quoted 10% APR fixed) This is from 2 banks and 1 loan company.

Seems a lot, especially with the base rate at 0.25% and for the same amount of personal loan I am being quoted between 3.5 - 4%

It's not always been this way, with personal loans cheaper, so it seems a bit odd to me when the whole mantra in the country is about getting businesses growing and expanding

Am I missing something obvious or are banks just being ripping off ******** as usual because they can

 

[Brizzles]

Established business or new business venture ?

A huge difference

 

[Freakbro]

Established, Ltd company - our bank even said they could approve 10K pretty much immediately with minimal accounts requirements as they could see the account had been run in such good order.

Established history with the loan company, have had at about 3 loans over the last 10 years with them.



Edit : Just for an example (haven't spoken to them) this online Barclays Business Loan calculator doesn't drop below 8% on the slider

http://www.barclays.co.uk/Businesslending/Businessloancalculator/P1242649179882

 

[VincentHanna]

If its your business there's nothing stopping you getting a personal loan and investing it in to the business.

As a ltd company you might find you have less personal liability if things go bad, if you take it out via the business.

 

[Freakbro]

If its your business there's nothing stopping you getting a personal loan and investing it in to the business.

Depending on the business setup (sole trader, ltd etc) you might find you have less liability if you take it out via the business though.

Yea, I know the caveats on use of personal loan within the business and both of these examples are for unsecured loans - though to be fair the bank guy said even with a directors personal guarantee it wouldn't make much difference to the APR

I'm just wondering on the justification of charging businesses so much more for loans, especially in the current climate

 

[VincentHanna]

Probably something to do with risk and exposure.

With a side order of profiteering.

 

[peige]

As soon as you put something against a business the charges go up.

I recently got a 70k loan to support a business acquisition, as a limited company of 16 years (established before that in 1969) with good books and decent assets / bank balance they still attempted to get it secured on my house. Ended up with a higher rate and no tab on my house.

 

[Greebo]

Established, Ltd company - our bank even said they could approve 10K pretty much immediately with minimal accounts requirements as they could see the account had been run in such good order.

Established history with the loan company, have had at about 3 loans over the last 10 years with them.



Edit : Just for an example (haven't spoken to them) this online Barclays Business Loan calculator doesn't drop below 8% on the slider

http://www.barclays.co.uk/Businesslending/Businessloancalculator/P1242649179882

Thats poor then. You must be a high credit risk. I just did a £1.1m busniess loan last week at 3.25%

 

[Greebo]

Probably something to do with risk and exposure.

With a side order of profiteering.

Margins have gone up over the last few years. Used to be base rate plus 2% margin but now its 3% as they want to keep private individuals sweet and shareholders.

But to the OP its risk vs reward. As an individual you are probably far more likely to pay it back and if you default they can get a ccj, send bailiffs in etc.

As a business if you default if it fails, more often than not the whole debt gets written off.

 

[peige]

Thats poor then. You must be a high credit risk. I just did a £1.1m busniess loan last week at 3.25%

Larger loans always get better rates. I doubt you'd get that rate on a small loan.

 

[unwashed potato!]

Probably something to do with risk and exposure.

With a side order of profiteering.

this is my initial thought too. you're a business that's very likely to pay it back in full on time. Personal loans have a good chance of being paid late, late payment charges on top, fees etc for all this and the personal loan can sometime end up costing the customer more than originally planned.

i guess they also want to encourage larger loans. these small 10k loans will be nothing to the business loan department in terms of profit.

 

[Freakbro]

Thats poor then. You must be a high credit risk. I just did a £1.1m busniess loan last week at 3.25%

Larger loans always get better rates. I doubt you'd get that rate on a small loan.

Yea, that's not really comparable Greebo, the loan rate dropped by 1% with a loan of up to £20k compared to £10k....so £1M is in a different league to these small business loans.

Look at that Barclays loan calculator, it doesn't even go below 8% for loans up to £25k!

 

[Greebo]

Yeah fair comment on the size of the loan

 

[Metalface Mark]

Yea, I know the caveats on use of personal loan within the business and both of these examples are for unsecured loans - though to be fair the bank guy said even with a directors personal guarantee it wouldn't make much difference to the APR

I'm just wondering on the justification of charging businesses so much more for loans, especially in the current climate

What about extending/getting overdraft? I think we pay 2% for our business overdraft.

 

[Freakbro]

What about extending/getting overdraft? I think we pay 2% for our business overdraft.

Good call, I have got an O/D on the business account, I'll check out the % on it