How to Get Guarantor Business Loans and How Do They Work?

Guarantor Business Loans

The guarantor business loans is a flexible loan product. If your business finances are not working at the moment, or you are facing other sorts of issues, then a business loan with a guarantor might work as the best solution. 

This has its reasons though. In 2018, almost 48% of the UK businesses took out this loan. And this has not been to fund a start-up or to acquire working capital for a small business. Guarantor business loans are important for comprehensive business persons no matter the size, type, purpose of the brand or the phase of work a brand is currently in.

What Are Guarantor Business Loans in the UK?

A business loan that comes with a guarantor is known as a guarantor business loan, right? Well, to be even more specific with this answer, you can say it is a business loan that is ‘secure’ with the help of a guarantor. 

Does it mean it is a secured loan? The answer is no. Does it mean it’s an unsecured loan then? The answer is again a no.

Take a look at any of the guarantor business loans in the UK and you’ll understand how flexible it is as a loan product. This loan is secured by a guarantor who co-signs the loan with you. Let’s say you fail to repay the amount. Your lenders will then reach your guarantor for the rest of the repayment. 

Taking it in this way, you can define the guarantor loan as a loan product that comes in between an unsecured loan and a secured loan such as a mortgage. It does not have collateral requirements. Conclusively, you can then categorise this loan as a separate financial product of its own having, a set of unique benefits. 

Are the Guarantor and the Co-Signer the Same Factors?

Yes and no. The loan industry has many terms to signify different terms. Sometimes, they can get confusing. And that’s okay. This is why we are here to help. 

The term ‘co-signer’ goes well as an umbrella term. Let’s suppose you are working with a loan partner or a fellow borrower who is signing the contract of a joint loan with you. That’s the co-signer you have there. You and your co-signer will equally pay the loan repayment instalments. That’s how it works. 

On the other hand, the guarantor can also ‘co-sign’ the loan with you. However, the guarantor might not take out a joint loan product, in which repayment is equally distributed to both borrowers.

To differentiate a guarantor from a co-signer, you can say that the guarantor may co-sign the loan and is not responsible for repaying the loan amount unless the main borrower fails to do so. 

Who Can Be a Guarantor Then?

The guarantor is a flexible factor for guarantor business loans simply because you can choose your guarantor as per your needs. And this has an advantage for businesses. What do you think that might be?

Well, a guarantor for a loan can be any person, such as a member of the family, a friend, a colleague or a co-worker.

Going large scale, a guarantor can be an organisation such as a school, a bank, an institution, and, of course, a business. 

The advantage of a business in searching for a guarantor is very easy because businesses deal with a lot of people and many other organisations. With many of them, the business might have a productive and long-term relationship. 

Your Angel Investor or a customer, or a customer that’s a business, might as well agree to co-sign a business loan as a guarantor for you. In summary, a guarantor for your business loan might be:

  • A person
  • An organisation
  • A corporation 
  • A business partner 

How Does Guarantor Business Loans Work in the UK?

Speak of the guarantor business loan in the UK and you might find them as easy products to begin with. They are even easier than you think. Sometimes, getting a guarantor business loan is as quick and effective as an unsecured business loan if you’re organised in the process.

  • Step 1: Find a Guarantor and Check Loan Affordability

Find a guarantor first and understand the financial limitations of both your business and your guarantor. Understand if you can afford the loan amount in the income you have. Using a loan calculator can help. 

If you see you cannot manage the money in this way, choose another guarantor or settle down for a loan with low rates or a different loan product. 

  • Step 2: Speak to the Guarantor about the Loan Product and Your Goals Clearly 

Speak to the guarantor and find out if the guarantor is willing to work with you dedicatedly till the conclusion of the loan term. 

You must make it clear to the guarantor that financial consequences might arise if the guarantor leaves in the middle of the loan term or does not comply with the rules of the lenders. 

  • Step 3: Arrange Your and Your Guarantor’s Income Details

Arrange income documents on paper of your business and of your guarantor. Find out that these papers contain the fresh and the most updated data about the income of both the co-signers. 

You will need to get your and your guarantor’s credit score upgraded as well. With a guarantor loan though, more emphasis will be given to your income rather than your credit score. It will help you get a loan faster. 

  • Step 4: Find a Loan Consultant 

It’s better to talk to a business finance broker organisation for a guarantor loan. It is because these organisations give you more than one loan option because they work with a panel of lenders.

Working with a business finance broker is important for your business because you have other jobs to do and you don’t always have time to search for the best loan option. 

To Conclude: We Are Here to Help!

We at TheBusinessFunds are ready to help you get your loan from a number of lenders. Working in the UK as a promising business finance broker for years, we have gained success by helping borrowers find out ‘better’ loans in time. We have also been remarked as a business finance broker for emergency financial requirements. 

Want to have a word with us? We’d be happy to do that. Just ring us or leave us a message. We’ll reply soon. 

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