Looking for a business overdraft or commercial loan and cant get one?
Business leaders often frustrated by lack of available funding to grow your business.
Overdrafts seem like a perfect business solution to many business, it feels like you only pay interest when you need to and nothing when you don’t. But its not that simple. You meet your bank manager, provide business plans, go for lunch. Two weeks later the bank asks for more information. Maybe a personal guarantee. After weeks of work the answer is no! Your bank may have frozen or removed your overdraft so your company has a constant cash flow crisis. Many businesses have experienced real reductions with facilities needed to grow the business. You may want to consider other forms of finance like.
Asset finance can work for you in many ways. It may not be as flexible as an overdraft. But if its a little cheaper that may offset the reasons not to look into this.
Il give you a few examples of asset finance.
Office furniture and office equipment. You could refinance your office equipment the resale value is negligible but financiers look at your balance sheet and the commitment cost of replacing these goods if they are removed from your business if you fail to pay. If you have a good balance sheet this can be useful for smaller loans. Things you might need are a business plan, accounts, trading over two years. If you have already been rejected by your bank for the overdraft you have probably done the work already.
What is this? In simple terms when you raise an invoice to someone and deliver the goods or service. You have created a contract and an IOU. A bill which in law acts very much like the promissory note of the cash in your pocket. ‘I promise to pay the bearer on demand the sum of Twenty pounds’ written below the Bank of England on your £20 note. Your invoice is almost the same but you might have 60 day terms. Its almost as good as saying I promise to pay you in 60 days the sum of …… your invoice amount. Factoring companies will pay you between 60 and 90% of your invoice value. This boost in instant cash flow in some circumstances is the equivalent of dumping the cash you need to make your next investment. The draw backs are normally the price the factoring company charges and the % of invoice you can raise.
Obviously think of the risks and rewards vs the instant cash flow vs the monthly payments over the term of the loan.
This is where your bank might help! I’ve put a helpful link to give you an idea.
As of Todays date without a deposit you wont get a bank to lend 100% loan to Value without some exceptional business progress. Never be afraid to ask but none of the major banks will lend much over 70% loan to value.
Is there such a thing? Well yes and no. Yes lenders use the term but typically in reality these loans fade away once you ask up to £25,000. Over £25,000 you will find in the small print that your balance sheet or a PG is actually securing the loan in my view there is no such thing. But if you ask you might get part of what you need.
Peer to peer.
Peer to peer is really rich people with cash lending to business without cash and therefore acting like a lending bank but without necessarily taking an equity position. Think of the programme dragons Den without the dragons. You will be accepted or you wont, even if it is a no. You still have other alternatives . If you go through a broker they can guide you for free through all the red tape. I have gone through the process myself and although I didn’t take the loan offered it was easier that way for me.
To try a broker
Or go direct to a company like funding circle. They have just past the £2 billion lending mark. Great for smaller business.
I hope that helps.
Robert Fahey 21.3.17