Surveyors are being extremely cautious
Even where a valuation can be done, surveyors are being very cautious. Whilst they will be producing the usual figures for an open market valuation, 30 day, 90 day and 180 day sale, they may also add a revised figure to allow for the likelihood that prices will fall after the pandemic is over. Some surveyors have even taken to writing, ‘this valuation cannot be relied upon’, on their reports. This makes the report worthless to many bridging lenders, who aren’t prepared to lend on the basis of this type of valuation.
Social distancing causing problems with witnessing legal documents
There are currently problems with getting legal documents witnessed by a solicitor as most are now working from home and not seeing clients face to face.
Staffing shortages are affecting lenders too
Lenders have also been impacted by the requirement for staff to work from home wherever possible and have had to set up systems to allow staff to work remotely.
Staffing numbers have been hit by those needing to self-isolate, which has affected lenders’ abilities to deal with new cases.
According to recent reports, where a small business is located can have a big impact on how likely it will receive funding. While some areas offer excellent prospects for funding others are virtually feeding of scraps according to statistics.
Figures from 2016 show that businesses that benefitted from the Bank Referral Scheme totalled only 900 out of the 19,000 that had been referred after failing to secure loans from high street lenders. Looking deeper into the stats just 75 of these companies was located in in the North West.
Looking at more recent figures from UK Finance, things haven’t changed much when it comes to loan approvals by UK region. All regions saw a year on year fall in loan approvals in the final quarter of 2017 apart from Wales which saw a 55% increase compared to 7.6% decline for England.
The statistics show banks still a have a long way to go before they have sufficient trust in lending to small businesses throughout the UK with the exception of Wales.
To get around this problem, businesses should consider alternative forms of business finance to support ambitious growth plans such as asset financing.
Starting a business from scratch is tough and the odds can be stacked against you if you don’t have enough investment capital to plough into the business at an early stage. Taking a loan, however, is also a major step which is why we have put together this guide to see if your startup is ready for a loan.
Do you have a business plan ready?
Having a business plan written down is a crucial step towards getting business finance. Lenders are going to want to see that you are serious about your business and a business plan indicates to them that you have took the time to develop your business and you have a clear pathway towards growing it.
Can you prove there is demand for your product or service?
Having a business idea and putting it into a plan is one thing but testing it out in the real market place is quite another. It will strengthen your case significantly if you can provide some data on real sales made and that your business idea works.
Finally, do you know what you need a loan for?
Applying for a business loan without any idea what it is for will almost certainly end in a failed application. Finance providers will be looking for some assurance over what the money will be used for.
Your idea of business finance may be a trip to the bank to get a business loan and this is the route most SME business owners will go down. However, there are plenty of alternative sources of finance to explore including some of the following you may not be aware of.
Asset finance is ideal for businesses that require expensive equipment but lack the funds to go and pay for all the equipment needed upfront. Asset finance can come in many forms from vehicle finance to finance on machinery. Asset finance is also flexible and can be arranged in the form of a lease or higher purchase (hp).
Did you know you can use your unpaid invoices to gain finance? You can use those invoices as collateral for loans or you can sell them to an invoice factoring company. This means you can get your hands-on cash in advance without having to wait for invoices to be paid. This is a great source of funding if you need cash in a hurry but with invoice financing you will still need to collect the invoice payments yourself.
Merchant cash advances
Another way to get your hands on some cash fast is to use a merchant cash advance. With this form of business finance, you receive a lump sum of cash up front and you won’t need to make a fixed payment each month. Finance can be paid back daily weekly or it can be paid out as a percentage of your sales from credit and debt cards. The downside is this type of finance can be more expensive than other options.