Each lender will have slightly different rules on what you can do with the funds – but expenditure, such as purchasing stock, hiring new staff, moving into premises, marketing costs and buying new equipment, is generally permitted.
According to the British Business Bank, the main reason for seeking finance is for working capital, followed by the purchase of business assets, as shown in the chart below:
Funds cannot usually be spent on debt repayment, training and educational opportunities or investment opportunities that are not required for the ongoing business.
You will be required to describe your intentions for your loan at the outset, to show that the loan will help you expand your business, and the lender is likely to undertake periodic monitoring of your cash flow position to identify any possible barriers to repaying your debt.
According to the British Business Bank, the main reason for seeking finance is for working capital, followed by the purchase of business assets.