Business owners can often be afraid to look at alternative routes for their finance needs but there is a lot to be gained from using a commercial finance broker to get the best finance deals.
Here are 3 reasons why your business should consider using a finance broker
You can get access to better rates
You shop around for everything else so why not shop around for the best rates on finance? A commercial broker can often obtain special rates from lenders because they will generally have good long term relationships with them. They can also help with paperwork to ensure you give yourself the best chance of securing the finance you need.
They are experts
Commercial finance brokers that have the relevant qualifications and accreditations are experts in their field. Using experts in anything will save you time and sourcing the best finance products is no different.
Save Yourself Time
We are all growing accustomed to just going online and searching for deals for anything from shopping to houses but finance is different. The various products available could never fit on one price comparison website so it could take a huge amount of time for you to try to beat the rate your commercial finance broker can provide.
There are many advantages to be gained from leasing using vehicle finance rather than purchasing a vehicle outright for your businesses. So it should come as no surprise that uptake continues to grow to the point where 300,000 cars were leased to UK companies according to statistics released last year (2017).
The two major attractions of financing rather than purchasing a vehicle include saving on the upfront cost and the ability to offset payments against tax. So while you may have enough cash in your business to purchase a van or a car, why would you when there are flexible ways to finance your vehicle and you can use that spare cash to fund and grow other areas of your business.
Vehicle finance like any other form of business finance works because you get to spend less cash which is ultimately what keeps a business afloat.
Vehicle finance can come in a variety of packages with the main ones being higher purchase agreements or business contract hire. The former is arranged on an agreed set monthly payment while the latter is an agreement to pay off the depreciation value of the vehicle.
Agreements can be arranged over a period that suits the business and its cash flow and the vehicle can either be sold at the end of the agreement or it can be transfer to your full ownership.
You may have heard about a form of lending known as a Merchant Cash Advance (MCA) which is currently growing in popularity. So what is an MCA and how can it be used by a small business? Read on to find out…
MCA’s are potential solution for businesses that need to maintain cashflow and are often applied for when it hasn’t been possible to secure a business loan. This is the case for many small businesses that apply for loans each year.
In fact net lending to small businesses in the UK has fallen from £3 billion in 2016 to just £700 million in 2017 which marks a substantial fall. The difficulty of obtaining a business loan from a traditional lender is as problematic as ever but all is not lost with a growing range of alternative options available.
The MCA doesn’t require any collateral to secure or even a personal guarantee. The money owed is simply paid back via card transactions. This makes this type of loan most suited to businesses that use card terminals on a regular basis to collect payments such as restaurants and retailers.
An up front cost is paid to receive a cash advance and the remainder of the advance is paid off by having a small percentage pf each card payment being paid to the MCA provider.
This makes repayments more flexible because the percentage remains the same and the amount paid will fall accordingly if takings are down.
If you would like to find out more about alternative sources of finance for your business contact us today.
Often one of the biggest barriers to small business and start up founders getting a business loan is a poor credit rating. So, if you have been turned down for a loan because you have bad credit let’s look into ways it may be possible to gain funding for your business even if you have a bad credit rating.
Find out why you have a bad credit record
Review your credit score online and find out what may be causing the problem. A poor credit score can come as a surprise and the first thing you know about it is when you are refused a loan. Sometimes the cause can be rectified if for example there are some discrepancies in addresses, your name isn’t on the electoral roll or if you have missed credit card payments.
Research lenders willing to provide loans to people with below average credit scores
Some lenders will consider business owners with below average credit scores so it is worth doing some research to find them. If your credit score is below 500 this can start to make life difficult and lenders willing to take the risk on you will become harder to find the lower your score is.
Look to alternative sources of finance that won’t require a good credit score
You may find there are plenty of alternatives available when it comes to finding funding for your business. Friends and family might be one avenue if they are understanding and supportive or asset finance could be an option.
Work to improve your credit score
Your credit score isn’t set in stone and it can improve significantly if you pay all your bills on time and avoid running up debts. Taking out smaller loans and using a credit can actually help improve your rating if you are sensible about making more than the recommended monthly repayments.
This is a common question asked by many a start-up founder who needs cash to get a business off the ground. The unfortunate reality is, a start-up represents a high risk to most lenders making them reluctant to provide loans to untested business start-ups.
While this might seem unfair, think of it from a lenders point of view. With an established business they will have some track record to go over before making the decision to lend. They will see things such as order books, records of paying customers and so on.
With a start up all they are likely to see is a business plan at best and an unproven business model. While the business might have huge potential in the eyes of the business owner, lenders, particularly those on the high street will be far more pragmatic.
Yet the start up phase is when a business is most likely to need the funding which is why it is important to discover what lenders of all types will be looking for before they offer a business loan.
If your business doesn’t have any sort of track record to rely on, then lenders will look at things such as your personal credit rating. If this is good then it will make you less of a risk as the business owner. Also you could look at alternative sources of finance such as asset finance depending on the assets your business might already possess.
There will be pros and cons to using any form of loan to fund your business and bridging loans are no exception. So to help you decide if a bridging loan is right for your business, here are some of the advantages and disadvantages of bridging loans.
So first let’s look at some advantages…
They are fast
Bridging loans tend to be arranged faster than other types of loan because they can often be used for urgent sources of finance when waiting too long might put the future of a business in jeopardy.
You can use more than one type of security
As long as the security you are using will retain its value. This means you can use assets that you may not be able to use as security for other types of loan.
The cons of taking out a bridging loan are…
You need assets to secure the loan
Unlike other types of loan, a bridging loan can only be provided if there are assets which can be provided as security.
You will be required to pay a lump sum at the end
This means the pressure is on from day one to earn enough money to cover the loan repayment at the end of the agreed term.
If you would like to find out more about the various different types of business loans available. Contact our experts today.
Many business owners unfamiliar with the various types of loans out there will ask the question what is a bridging loan? Here is a brief guide to bridging loans and how they can be used to help your business.
The best way to think about a bridging loan is to imagine a bridge that allows you to get from one place to another. The main reason bridging loans are used widely by businesses is to get themselves from point A to point B. The finance provided by the bridging loan is the bridge they then step on to get to the other side.
The loan is intended to allow your business to get to the next stage of growth until you can then secure a longer term form of finance to help you reach your business goals.
Bridging loans can be secured much faster than standard loans which means they are great for those businesses that need immediate cash and don’t have the time to wait around too long for decisions.
Bridging loans can be used by property development or other commercial operations as long as there is an exit strategy in place. Another drawback with a bridging loan is the higher interest rates charged on the amount borrowed.
What is a start-up loan? How does a start-up loan differ from a conventional loan if at all? Find out more in this short guide to start-up loans.
What Is A Start-Up Loan?
There are many different types of loans an load products on the market which can be used by start-up founders to fund their business. A start-up loan however is a traditional type of loan from a traditional lender however there are different types of loan available depending on the needs and financial position of the business. Start-up loans are not to be confused with other newer forms of loans such as crowd funding.
What are the various types of start-up loan?
One of the more popular types of loan for a startup is a line of credit. This essentially works in much the same way as a credit card. A set amount of money is available to the business owners to use when they need it. Agreements are often interest free to begin with but can come with a sting in the tail when this period is up and interest becomes chargeable.
Equipment financing is a type of loan that allows a business to purchase the equipment it needs to function with the loan used as collateral. This type of loan is usually available at a lower interest rate than many alternative types of loans. The purchase can then be paid off as the business hopefully gorws and starts generating income. The depreciation of equipment can also be offset against tax which is another benefit of this type of loan.
The great benefit of this loan is that rather than fronting the cost of equipment before your business opens, you are able to pay off the cost as your business grows and makes money.
While securing a loan for a mature business in good health is relatively straightforward, for smaller businesses and start ups going to the bank for a business loan can often end in rejection and disappointment.
In the past this would usually lead to business owners giving up on their growth and expansion plans unaware there might be alternative sources of funding readily available. This is why the government came up with a scheme that referred those businesses that were turned down for a bank loan to smaller lenders or companies offering alternative sources of finance such as asset finance.
The referral scheme was introduced in November 2016 and according to the government it has been successful in sourcing £15 million of funding for small business with loans ranging from £100 to £1.3 million.
Such is the demand for funding in the small business sector, the amount loaned via the referral scheme quadrupled in its second year with 670 businesses benefitting from the extra funding in the last 12 months alone.
These results while amounting to a small proportion of the amount of money being lent to businesses each year show just how many businesses might not have received the vital funding they needed to develop.