Need extra cash in the business? There’s more than one way to get it, and they’re assessed very differently. Here’s how business loans, overdrafts and equity release actually compare — and how to work out which one is the cheapest, easiest path for you.
Business loans and overdrafts
Both of these are typically assessed off what your business is earning. As a rough rule of thumb, lenders will rarely lend over about 10% of your yearly turnover — so the amount you can access is tied directly to how much revenue the business brings in. They’re a solid option when you need working capital and don’t have a specific asset to lean on.
Equity release (capital raising)
Equity release works differently. If you already have significant equity in an asset — a truck, a machine, a trailer — a lender may pay out what you still owe on it and give you extra cash on top, against the value of that asset. You don’t even need to own the asset outright to do this.
For example: say you owe $30k on a truck worth $250k. Another lender may pay out that $30k and hand you an extra $100k in cash — secured against the truck. It works a lot like a second mortgage, but on your truck instead of your house.
Because the lender has a clear asset to secure the loan against, equity release is typically a lot easier to get approved for, and cheaper in rate, than a standard business loan or overdraft.
The fast-cash trap
A word of warning before you take the quick option: the online “fast business cash, funded in 24 hours” lenders might solve today's problem, but in our experience a loan from one of them — or even just an enquiry on your file — makes you close to unfinanceable with mainstream lenders afterwards. It reads as last-resort borrowing, and it's one of the hardest things on a credit file to work around. If cash flow is tight, talk to us about the options above first — the conversation doesn't touch your file, and there's almost always a cheaper path.
What all three have in common
Whichever path fits, lenders will want to see your bank statements to prove roughly what the business turns over and confirm there’s no banking misconduct on the account. What lenders are actually looking for in those statements — and how to make sure yours hold up — is covered in our clean bank statements guide.
How Budget Finance can help
We arrange all three — business loans, overdrafts and equity release. Tell us what the money’s for and we’ll tell you the cheapest sensible path to get it, rather than pushing you toward whichever product happens to be easiest for us to write.
Need capital in the business? Get in touch and we’ll talk through your options.
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