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Banks and government support to UK firms tops £100bn

Struggling UK companies have now received more than £100bn worth of support from banks and the government through various coronavirus stimulus schemes, official figures have shown.

UK banks have lent out more than £58bn to hard-hit companies through the government-backed coronavirus loan schemes, according to Treasury figures out today.

HMRC figures showed that companies have claimed £39.3bn from the government through the furlough scheme. The programme has supported almost 10m workers.

The figures come as the government prepares to extend the loan schemes so that companies can apply for cash until the end of November.

It is a sign that the government thinks businesses will need more support over the autumn as coronavirus cases rise and new restrictions are imposed.

Chancellor Rishi Sunak has promised to be “creative” in helping workers and firms, although so far has resisted pressure to extend the furlough scheme.

To find out more about how we can assist you with your Business Loan requirements, please click here to get in touch

Bounce back loans hit £38bn

The vast majority – £38bn – of the bank lending has come through the bounce back loan scheme, under which the government guarantees 100 per cent of loans to small businesses. Banks have made 1.26m loans through the scheme.

Banks have lent out £15.5bn through the coronavirus business interruption loan scheme (CBILS), the Treasury figures showed. It carries a government guarantee of 80 per cent. Just over £3.8bn had been lent through the coronavirus large business interruption loan scheme (CLBILS).

The HMRC figures also showed that the government had spent £13.4bn supporting self-employed people.

August’s Eat Out to Help Out scheme saw Britons eat more than 100m discounted meals in August. The scheme, which provided 50 per cent of meals, cost the government £522m.

As of yet it is unclear how much of the bank lending will end up being the government’s problem.

City groups have flagged that companies could be overwhelmed by debt taken on during coronavirus, and have called for help.

Stephen Pegge, head of commercial finance at banking body UK Finance, said that “the banking and finance industry has a clear plan” to help companies get “through these tough times”.

Yet he warned that “it is important to remember that any lending provided under government-backed schemes is a debt not a grant”. He added: “Firms should carefully consider their ability to repay before completing an application.”

By Harry Robertson

Source: City AM

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Government launches £330bn coronavirus business loan scheme

The government has launched the first stage of a £330bn loan guarantee scheme for businesses, to help small and medium-sized firms borrow up to £5m to help them weather the impact of coronavirus.

“Any viable business” with a turnover of up to £45m will be able to apply to banks for an 12-month interest-free loan, 80 per cent of which will be guaranteed by the government under its Business Interruption Scheme, the Treasury said.

“We know that businesses are in urgent need of access to funding during these unprecedented times,” said business secretary Alok Sharma, who added that the scheme “will ensure that credit keeps flowing to where it is needed, when it is needed”.

Chancellor Rishi Sunak last week unveiled an unprecedented package of measures aimed at supporting businesses and employers struggling with the economic impact of coronavirus, including tax deferrals and an employee retention scheme.

The Treasury said this morning that further measures would be announced to ensure large and medium-sized businesses could access financing.

The Bank of England this morning announced the opening of a scheme to buy up debt known as commercial paper, issued by large businesses which had an investment-grade credit rating or similar level of financial health before the coronavirus pandemic hit.

BoE governor Andrew Bailey said the corporate financing scheme would “help businesses manage through this period of uncertainty”.

“Combined with steps taken by the government, this will help companies through this difficult time and support the needs of the people of this country,” he added.

Bailey said last week that the Bank would look at widening the financing scheme to firms with lower credit quality, or buying other financial instruments such as asset-backed commercial paper.

By Anna Menin

Source: City AM

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Personal guarantees are turning 50% of SME owners off business loans, weakening Brexit preparations

In recent years, many banks in the UK have offered increasing support to British businesses through access to finance. However, many SME owners are rightly concerned about the prospect of using personal guarantees when securing access to funding.

Taking a different viewpoint on the matter, Purbeck Insurance Services has suggested that small business owners should not be deterred by personal guarantees, and instead should seek out ways they could dampen the risk.

In a survey carried out earlier this year on 500 small business owners and directors, Purbeck found that while a staggering 49% had never taken out any business finance, 29% of respondents had typically called on their bank overdraft to fund their business.

What types of business finance have you ever taken out?

I have never taken out any business finance 49.00%
Overdraft 29.00%
Unsecured business loan 16.00%
Commercial mortgage 10.40%
Asset finance 9.00%
Invoice finance/factoring 7.60%
Other loan secured by debenture or charge 5.20%

Furthermore, a significant 12% of small business owners claimed to have decided against using business loans to fund their organisations as they included a personal guarantee.

Todd Davison, director of Purbeck Insurance Services, explained: “Our findings suggest that many small business owners could be looking at external finance for the first time in readiness for Brexit. It’s important they seek independent advice and consider Personal Guarantee backed finance as part of their options as they can seriously reduce the risk of these types of loans.

“As well as taking Personal Guarantee Insurance, they can also share a Personal Guarantee with fellow directors of the business, and negotiate which part of the loan is covered.”

The company’s personal guarantee insurance is an annual insurance policy that provides SME directors with insurance in the event their business lender calls in the personal guarantee, provided by the directors as part of raising business finance.

In an effort to help mitigate risk for small business owners considering opting for a business loan including a personal guarantee, Purbeck offered several tips including:

Negotiate a time limit for the Guarantee and a cap on the amount;

Educate yourself about the risks, whether you can afford to take them and always seek legal support;

Consider splitting the Guarantee between directors;

Know where your responsibilities for the Guarantee begin and end – is it loan specific or does it cover all future loans that the lender may provide?

Remember that if you have signed a Personal Guarantee for another business loan they are cumulative;

Agree terms so that the lender seeks settlement from company’s assets before enforcing the Guarantee

Confirm all points of agreement intention and expectation in writing with the lender.

Consider Personal Guarantee insurance to protect against the risk that the Guarantee is called by a lender. This will offset any outstanding obligations called in under a Personal Guarantee.

Written by Miles Rogerson

Source: Asset Finance International

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Steepest fall in lending to UK businesses for almost two years

LENDING to UK businesses saw the biggest decline in almost two years in July, the Bank of England has reported.

Net lending to UK firms slid by £4.2 billion over the month, driven by a £2 billion net repayment by businesses to banks.

The significant amount of repayment saw the annual growth rate of bank lending to UK businesses fall to 3 per cent, down from 4.4 per cent in June.

Analysts have suggested the slump in borrowing could be another sign that firms are resisting investment which would need a loan and are hunkering down until there is greater clarity over Brexit.

The decline was most significant among large businesses, where the growth rate of borrowing fell to 4.2 per cent.

Growth of borrowing by small and medium-sized firms (SMEs) was unchanged at 0.8 per cent for the month.

Michael Biemann, chief executive of Selina Finance, said: “SME borrowing rates remained static at 0.8 per cent, which once again underlines the disconnect between the average UK business and the high street.

“These days, high street banks want businesses to jump through all kinds of hoops to secure finance, and so it’s no surprise the number of SMEs turning to alternative sources is on the increase.”

Meanwhile, the new Bank of England figures also revealed that British lenders approved the greatest number of mortgages for two years in July, appearing to highlight greater stability in the housing market following a Brexit slowdown.

The central bank said lenders approved 67,306 mortgages last month, up from 66,506 in June.

The UK housing market has been downbeat since the EU referendum in 2016 but has shown tentative improvements in recent months.

However, earlier on Friday, the latest Nationwide housing survey revealed that annual house price growth ran below 1 per cent for the ninth month in a row in August as consumer confidence remained low.

Source: Irish News

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A Complete Guide to Financing Start-ups in the UK – Start-up Loans, Governments Grants & More

Financing a start-up can be challenging. In this post, we explore the various ways – from start-up loans to crowdfunding – in which you can go about overcoming this challenge.

The world has seen unprecedented innovation in the last 30 years. By many estimates, these years account for more path-breaking, paradigm-shift-inducing inventions, innovations and ideas than the rest of the human history combined.

It wouldn’t come as a surprise, then, that this culture of innovation has impacted the economy just as definitively as it has our everyday lives. The smartphones we use, the smart payments we make and the big data we routinely stand in awe of – these innovations have left few aspects of modern life untouched. Much the reason why, there has also been a remarkably noticeable upsurge in the number of people answering their entrepreneurial ‘calling’.

The numbers are telling in this regard. In the last five years, the business registration rate has steadily increased despite all the uncertainties around the impending Brexit. If your start-up is among these, it’s quite likely that you are looking for better ways than putting your life savings at stake to raise enough capital.

The Importance of Financing a Start-up Correctly

Choosing a right set of financing options is of utmost importance for any commercial activity.

For start-ups, however, this becomes an even more sensitive proposition. Unfortunately, many promising start-ups pay the price for indecisiveness, inaction and incorrect decision-making. We have seen that the start-up culture is booming in the UK – but there’s always a downside to every argument. The statistics released by the ONS suggest that 48% of new businesses do not survive their first four years of trading. In 40% of such cases, financing problems is the major reason.

By weighing the start-up financing options discussed below, you can avoid your start-up from meeting this grim fate.

1. Start-up Loans

When it comes to funding start-ups in the UK, start-up loans should be the first option you explore.

In the last few years, start-ups have managed to instil a good deal of confidence among lenders. More and more private lenders and banks have started looking at start-ups as huge opportunities, and not mindless, risk-filled adventures. This pattern means that getting a start-up loan is the most affordable and convenient funding option for start-ups across industries.

What is a Start-up Loan?

Start-up loans, even though granted exclusively to start-up businesses, are more like personal loans than commercial loans. This is primarily due to the fact that start-ups don’t have any history of trading to refer to. In most cases, start-ups are founded by a small group of partners and have no history of business credit for the lenders to go by, either.

In essence, a start-up loan is a small, unsecured loan that hinges entirely on the viability of the business model and the personal credit history of the proprietor or the partners.

With one or more start-up loans, you can expect to raise capital up to £25,000.

Why Choose Start-up Loans?

Start-ups, unlike established businesses, have very specific needs, and start-up loans address these needs better than any other financing alternative.

  • Easy to Secure

Start-up loans are much easier to secure when have a good-enough business plan and a blemish-free credit report.

  • Fast Processing

Start-up loans are processed just as quickly as personal loans. This saves you precious time and resources that can be directed towards a successful launch.

  • Little to No Collateral Required

Most lenders offer unsecured start-up loans, once they are convinced of your repayment potential. For higher loan amounts, some collateral may be required to offset the risk taken by the lender.

  • Industry Expertise

This is one feature few other start-up financing options can offer.

If you receive a start-up loan offer from an experienced lender specialising in your industry of operation, it can add immense passive value to your business.

How to Get a Start-up a Loan?

Although most mainstream lenders offer start-up loans, the eligibility criteria and repayment schedules differ wildly from one lender to another. The easiest and fastest way of securing a start-up loan that is tailored to meet your needs is to have a reputed broker like Commercial Finance Broker on your side. Whole of market brokers can approach UK-wide lenders on your behalf, increasing your chances of getting affordable and customised start-up loan quotes.

2. Government Grants for Start-ups

If you are familiar with the start-up culture in the UK, you’ve probably heard of government grants. Even though relying solely on government grants to finance your start-up is impractical, it’s equally unwise to dismiss this option altogether.

What is a Government Grant?

A government grant is essentially a reward granted to various businesses and charitable organisations under various schemes and from various public funds. The primary motive behind the establishment and distribution of government grants is to incentivise innovation, foster entrepreneurship and, in turn, create more employment in various business sectors.

Depending upon the objectives of the grant, your start-up can receive upfront cash rewards, tax incentives, equipment support, technical support and no-interest/low-interest loans. UK start-ups can receive grants from the local authorities, the UK Government and the European Union.

Government Grants for Start-ups: Types and Features

  • Direct Grant (Direct Finance)

This is the most popular type of government grant available for start-ups and young businesses. When you apply for a direct grant, most schemes and trusts will require you to match the grant reward 1:1. In other words, you can expect to raise up to 50% of the required capital using the grant, while the rest will need to be raised through private funding.

  • Available for start-ups
  • Grant size varies from £500 to £500,000 (subject to available schemes)
  • Non-repayable
  • No interest
  • Soft Loans (Subsidised Loans)

Soft loans or subsidised loans aim to strike a balance between direct grants and private or peer-to-peer start-up loans. These loans, available as government grants, are subsidised with public funds so that cash-strapped start-ups can afford them.

  • Loans up to £25,000 are available for start-ups
  • The interest rates (4 to 6% p.a.) are much lower than other loan alternatives.
  • The repayment terms are lenient and generous.
  • Equity Finance (Tax Incentives)

This is a lesser-used but extremely powerful government grant. Through such schemes, the government promotes investments in start-ups by offering up to 50% rebates in the income tax for the investors. The rebate percentage depends upon the size of the business and the business sector.

  • Income tax rebate up to £100,000 can be claimed.
  • Available for start-ups and young businesses with fewer than 25 employees

Government Grants: What Start-ups Should Know

  • Applying for and winning a government grant is often a time-consuming process. If your start-up requires an urgent finance package, grants may not always be useful.
  • The competition is fierce. In recent years, it has become nearly impossible to win government grants in business sectors that do not have a direct impact on the socio-economic policies of the government.
  • Even if you manage to win a government grant, you will still be required to secure an external loan to raise enough capital.

How to Apply for Government Grants

The application process is, in itself, a bottleneck. The slow processing times and ambiguous terms mean that you will need to prepare an extremely thoughtful grant application to qualify.

If you want to win a government grant for your start-up, a proven and systematic approach must be adopted.

  • Know What the Grant is Trying to Achieve

Many start-ups choose to send applications to any and every grant scheme that comes up. This approach usually results into a great deal of wasted time and resources. Instead, you should aim to apply for grants that have specific objectives relating to your business sector.

  • Communicate with the Grant Body/Organisation

It’s always advisable to have a clear communication with the grant body if any of its objectives or terms are unclear. This will help you understand whether you should invest your resources into preparing a grant application.

  • Prepare a Grant Application That Stands Out

Remember – dozens, if not hundreds, of businesses will be competing against you to win the grant in question. Preparing an outstanding grant application will improve your chances significantly. Your grant application should be able to convey how your start-up aligns well with the grant objectives.

  • Supplement Your Grant Application with a Business Plan

You will need a great business plan to bolster your grant application. In the business plan, emphasise the aspects of your business that directly concern the grant objectives. Additionally, you will be required to furnish any external funding commitments you may have received – especially if you are applying for a direct grant.

  • Keep Checking for New Grants

Dozens of new start-up grants are introduced each month. It’s widely believed that the early-bird applications have a higher chance of winning government grants. The definitive list of available grants can be found at the Business Finance Support Portal launched by the UK Government.

3. Investments

If there’s one thing that has added an extra touch of glamour to the very idea of entrepreneurship, it’s the awe-inspiring risk appetite shown by external investors. The stories of start-ups receiving outlandish investment deals regularly make the rounds in start-up circles – and not without their reasons.

Having an external investor on board can be the most cost-effective way of financing your start-up. There are many ways in which your start-up can bring in external investments. Some of these are:

  • Equity investments (selling a share of your equity in the business)
  • Capital investments (mortgaging a share of your equity in the business)
  • Credit lines (flexible credit lines on an as-needed basis in exchange for a fixed percentage of revenue/profits)
  • Custom investments (fully customised investment plans)

4. Crowdfunding

Crowdfunding is an effective way of raising small sums of money, especially for consumer-facing start-ups. It’s all about letting numerous people contribute in their personal capacities in exchange for a stake in your business.

Crowdfunding is a good way to raise money in order to address specific business objectives such as:  fuelling research, manufacturing prototypes, financing marketing campaigns and entering new markets.

Is Your Start-up the Next Big Thing? We’d Love to Hear from You!

There’s something innately attractive about dreaming of an idea, working hard to bring its seed to life and watching it grow into something significant. The unfortunate reality is that many such dreams are routinely cut short for the want of more funding.

At Commercial Finance Network, we’ve been living the entrepreneurial dream – with all its highs and lows – for over a decade. With the help of our UK-wide panel of specialist lenders, we’ve helped numerous start-ups overcome their financing problems. Customised to the highest degree, the start-up loans we broker are more than just loans – they are what the ambitious start-ups of today need to turn the corner and scale newer, higher peaks of success.

Don’t let the funding shortfall stifle your start-up even before it takes off. Call us on 03303 112 646 or fill in our contact form to request a free start-up loan quote.

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Get Your SME Finance-Ready – 5 Actions to Improve Your Business Loan Eligibility

Looking to get an SME loan? Avoid these common mistakes to immensely improve your chances!

Taking the entrepreneurial leap of faith might well turn out to be the most rewarding thing in your life. The sheer joy of seeing a plan, a concept – a dream, indeed – materialise is indescribable. But to get there, you’ll first need to take off the rose-tinted glasses.

The world of business is ruthless beyond measure. No industry, no sector, no niche is devoid of competition. Therefore, your business – like every other business – will need to withstand this competition day and night in order to survive, thrive and, eventually, succeed. And this process invariably involves scaling up your business – a point at which drawing strength from your personal savings or seeking help from friends or family just isn’t enough. This is when you, as an SME, are most likely to seek external funding and financing. This, also, is when you have every chance of seeing multiple business loan applications turned down.

How does a young SME go about securing a business loan that’s both substantial and fair?

That’s a question that needs to be discussed in multiple blogs. For now, we will take a look at the steps that you can take to give your business the best chance of getting business loans. Before that, however, it will be more prudent to understand how the lenders perceive SMEs.

SME Lending Is Changing

  • The lending landscape is fast changing.
  • Open Banking will make getting business loans less difficult for SMEs.
  • Banks’ isn’t the only voice that matters.

SME Lending in the UK – A Stat Check

  • Asset finance, general business loans, equity finance & most other commercial SME loans have grown in size since 2015.
  • As many as 7 in 10 small-business loan applications were approved by lenders in 2017-18.
  • 62% of all SME finance applications in 2017-18 stated business growth as the principal reason for the loan.

British Business Bank SME Finance Report 2017-18

UK Finance Quarterly Reports

Liberis Business Survey 2018

Regardless of the narrative or the wider picture, it’s safe to say that the lenders have always dictated the terms of the commercial finance game. They have had the absolute right – at times, an unfair proposition – to accept, modify or reject business loan applications from SMEs as they see fit. While this isn’t likely to change anytime soon, there are definitely some levellers being introduced by the government to make the playing field more even.

The first amongst this is the rather dramatic arrival of Open Banking (better known as PSD2 across mainland Europe) earlier this year. This purported game changer will not have as much of an impact on everyday banking as most thought. The lending game, however, has been forever changed since its introduction. Thanks to the absolute customer-side control of finance data, your business can now request – nay, compel – big banks in the UK to share your 12-month financials, credit history and other data with private, P2P or overseas lenders. While such data sharing isn’t a new concept, the edge lies in the fact that Open Banking will let the borrower have more control over their data. What this means, essentially, is that getting your SME finance-ready will be much, much easier now than it was five years ago. The lenders will be able to make better, more informed lending decision based on this data – just about as seamlessly as personal loan or credit card applications work.

This development is in perfect alignment with the Small Business Enterprise and Employment Act of 2015 that had made it mandatory for banks and institutionalised lenders to share finance data with alternate credit partners for SME loans.

The fact of the matter is – if you run an SME in the UK, you have a great chance of securing a business loan today than ever before.

What Does It Take for an SME to Get a Business Loan in the UK?

The lending criteria differ from one lender to another. They also depend upon the type of the loan you seek. Some of the most common and fundamental lending criteria for SMEs in the UK are:

  • The borrower should be a registered business entity (Sole Trader, LC, LLP or PLC).
  • The business should have a ‘demonstrable’ trading history of 18-24 months.
  • The director(s), owner(s) or proprietor(s) should be able to furnish personal guarantees if required.
  • The business financials should be able to demonstrate a certain minimum turnover (subject to the amount of the loan).

Understanding Why the Lenders Are Forced to Say ‘No’

Despite the lending atmosphere that’s gaining in positivity as far as SMEs are concerned, quite a few business loans are still routinely declined. In this light, it’s important to understand the common reasons why small-business loan applications fail to get approved. This will help you eliminate a major hurdle in getting finance for your business.

The Business Isn’t on Top of Their Credit Score(s)

Countless SME loan applications fail to pass the very first check that banks perform – the credit check. What’s more astounding is the fact that many SME owners aren’t even aware of the credit trail they leave while their business is trading.

The Business Has Problems

It’s a vicious cycle but that’s how it is.

Most businesses apply for loans when there’s a cash crisis. And lenders don’t like such situations. This Catch-22 is perhaps the biggest hurdles SMEs face in getting approved for a business loan. Along with cashflow problems, other problems such as a questionable business plan, a history of poor business decisions, lack of expertise at the helm and inability to prove the growth potential often lead to loan applications being turned down.

The Time Just Isn’t Right

You cannot apply for a regular SME business loan if your business is just starting up. Most lenders will want to see a trading history of no less than 2 full years. Similarly, if you’re applying for a business loan and your business has been trading for 20 years with little to show for it in terms of growth, the lenders won’t take a liking to your application.

There’s No Collateral Provided

Unsecured business loans attract closer scrutiny from lenders. So, for an SME that doesn’t have a great deal of creditworthiness, it becomes imperative to provide additional security. Business loan applications that aren’t backed by adequate collateral or guarantees usually get declined.

The Plate is Already Too Full

Just like personal loans and mortgages, you cannot expect to get a business loan for your SME if you already have a number of repayments to take care of. A business loan application from an SME dealing with a plate full of loans is almost certain to get rejected, leading to a soft credit enquiry mark that further worsens the situation.

Steps You Need to Take to Improve Your Business Loan Eligibility

There’s no telling what the lender will think of your business loan application. Perception is a strong phenomenon and is still relevant despite much of the work being handled by tried-and-tested credit algorithms. You can, however, take the following steps to make sure that your application stands a very good chance of finding takers.

1. Make Sure the Foundation of Your Business is Strong & Convincing

You want the foundation of your business to be sound, strong and stable. This is vital not just to secure a business loan but also to achieve profitability in the long run.

When you know that your business has a great shot at success, you should be able to convince other people of the same. To convince lenders, you will need a great business plan – especially when your business is relatively new. A good business plan should be accompanied by a cause-and-action plan. This will involve a good explanation of why your business needs a loan, how you plan on using the funds and what your repayment schedule will be like.

A fully customised proposal with all the relevant details shows the lender that you’re serious about the business. This always works in your favour as lenders perceive you as less of a risk and more of an opportunity.

2. Get Your Business Financials in Order Before You Apply

Many businesses get this wrong – but you shouldn’t. Never apply for a business loan if you don’t have an independently audited, tax-certified financials for at least two years in your possession. These financials typically include the tax returns, quarterly balance sheets, cashflow analysis and profit/loss statement.

It’s common for lenders to also request projections over the loan term. So, it’s a good idea to prepare revenue, profit/loss and assets/liabilities projections for up to 5 years before you approach a lender.

3. Know and Understand Your Credit Scores

Regardless of everything else, most lenders will eventually take a look at the credit history of your business before making a decision. Any obvious red flags on this report – from delayed payments and missing records to frequent enquiries and grave defaults – will hurt your application. So, it’s important to know and understand your credit scores before you apply. This includes building a solid credit history for your business as well as personal accounts.

Less than 20% of all SMEs in the UK proactively monitor and assess their credit scores – you don’t want to be a part of that group!

Some useful steps in this regard are:

  • Checking your business credit score once every quarter
  • Filing for corrections when you spot inadvertent mistakes or errors
  • Using a dedicated business account for your business activities
  • Utilising credit facilities such as overdrafts and credit lines judiciously
  • Making timely repayments
  • Not making ‘hard’ enquiries for credit unless you are ready to submit a full application

4. Let the Lenders Know That You Are Invested

A commonly ignored and often decisive mistake is the failure to demonstrate your involvement in your business. Many businesses – especially the ones not registered as Sole Traders – face this problem, just because there’s no ‘face’ attached to the business.

An easy way to avoid this is to make an offer for a collateral. This shows the lenders that you are willing to share the risk with them. Secured loans are always easier to go through.

5. The Time and Timing – Both Should Be on Your Side!

As a rule of thumb, you shouldn’t go searching for a business loan when your business finds itself cornered with nowhere to go. This will only lead to you ruining your credit history with multiple rejections. Having enough time at your disposal is the key. This is where good business intuition and experience will come in handy for you.

As far as getting the timing right goes, you should be well aware of the market situations before applying for a loan. Has the industry your business operates in been faring poorly of late? Have there been any major changes in the lending landscape recently? What has been the trend in the interest rates being offered over the last six months?

Answers to such questions will give you an idea about whether you should apply for a loan right away or it’ll be wiser to wait for a few weeks.

Getting a Business Loan is a Process and Should Be Treated as Such

Many loan applicants think that lenders are prone to making arbitrary decisions. While true in rare scenarios, this usually isn’t the case. The lenders are also in the business – the business of lending money. The more businesses they lend to, the more money they end up making. So, as long as you have taken care of the ‘risk’ factors discussed in this article, you will have little to worry about when you apply for an SME loan.

Applying Left, Right & Centre – A Big No!

The biggest – and unfortunately, the most common – mistake that SMEs make is to apply for credit with no plan of action. Applying at a dozen places will not only lead to simultaneous rejections that will do your credit score no good but also handicap your business from accessing finance when you need it the most. Before applying for any business loan, you should be aware of what your options are – without making hard credit enquiries.

That is exactly what we at Commercial Finance Network, a leading whole of market broker, do for you. Working with some of the best-known and specialist lenders across the UK, we make sure that you get a loan offer that’s fair, fast and flexible.

The days of blindly accepting the first offer that comes your way are long gone. Let our team of experts curate the best business loan quotes for you. Call us on 03303 112 646 or contact us to speak with one of our Business Loan Specialists today!

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Business Loans: Is Having Bad Credit the End of the Road?

Running any business—small, medium, or big—is never easy. Besides all the dedication, passion, and hard work you’ll need to put in every moment, you should have constant access to capital or funds to grow your business successfully.

Bank loans are one of the most common financing sources for businesses around the world. In fact, banks in Europe have provided loans to the tune of about 1.4 trillion euros to small and medium enterprises. But, this doesn’t mean that every loan application from a bank gets approved.

In the United Kingdom alone, the rejection rate for business loan applications varied between 33% and 19% from 2013 to 2016. According to the Federal Reserve’s 2016 Small Business Credit Survey, less than half the number of loan applicants received the financing amount they sought. The rest got lesser than what they wanted or nothing at all.

Getting a Small Business Loan

Most of these loan applications were rejected because of the borrower’s poor credit. In truth, bad credit can be your downfall if you’re looking for a traditional bank loan. But, it doesn’t necessarily mean it’s the end of the road for you as a borrower.
From finding alternate lending sources to boosting your creditworthiness, a little groundwork can go a long way in increasing your chances of approval. Read on to see how you can go about applying for a business loan if you have bad credit:

Building Personal Credit

A good place to start when you’re looking for a business loan is building your personal credit score. Ensure you’re making all payments on time and keep a tab of how much you owe.
If you’re in debt, tackle the bigger payments first. You could try the snowballing method, a balance transfer card, or even a loan to consolidate your debt into more manageable payments.

Making a Business Credit Profile

A separate business credit profile is advantageous to have, especially when your personal credit is bad. It gives credibility and improves your chances when you need financing.
It also works much the same way as your personal credit score if there’s ever a need to rebuild it. Just make sure all your payments are made on time.

Creating a Strategy

For a business to be successful, creating an effective business strategy is highly important. From developing a vision statement to identifying strategic objectives, you’ll need to know where you’re headed and what you need to do to make it big.
You could also try your chances at enhancing your creditworthiness. All you need is a letter of reference from your personal or business contacts.

Preparing the Required Documentation

Getting the right documents in order is another important step to applying for a business loan. Along with the letter of reference, it’s important that you keep your personal information, resume, bank statements, and business plan handy.
You should also have your income tax returns, debt schedule, loan application history, and other legal documents in place.

Finding the Right Lender

Traditional bank loans aren’t the be all and end all of business financing. You could try direct lenders like equity firms and investment banks or peer-to-peer lenders. You could also try term loans, equipment loans, invoice financing, microloans, or merchant cash advances.

The advantage of seeking alternate financing is that you get comparatively lesser approval criteria and quicker funds disbursement. On the flip side, you may have to deal with higher interest rates and personal guarantees.

To stand the best chance of finding a business loan that works perfectly for you, you’ll need to compare multiple offers. In addition, remember to factor in loan costs, repayment period, eligibility criteria, and the lender’s reputation before you take the next step of application.
So, don’t lose heart if your bad credit score is stopping you from getting your business off the ground or taking it to the next stage. Following the steps above will help you work around your credit situation and get the required financial assistance.

Source: FinSMEs

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Three ways to improve your chances of getting an SME loan

Lenders have a set perceptive on what a healthy business is, and they only ever lend to those that are healthy. Businesses that can’t show a capability to repay are rejected, and businesses that do not submit an accurate application are too. If you are thinking about applying for an SME loan for your business, there are three main ways to improve your chances of being approved.

  1. Submit an accurate application

It sounds so, so obvious, yet you’d be surprised by how many applications lenders receive that do not contain accurate information (around two in five). The information you supply in your application will be used to determine its legitimacy. You’ll include the names, dates of birth and home addresses for all business owners and your company registration number. If these details are inaccurate, the loan application will be refused, and you will have to start over again.

It makes sense to take your time with your application. Write down all answers to information requests and double-check their accuracy. By ensuring you submit an accurate application, you allow a lender to decide whether or not to approve your application based on your business’s health and what you plan to do with the money.

  1. Maintain and show business profitability

Lenders want to see capability of repayment with SME loans. The best way to show this is by maintaining profitability in your business. Profitability is important because it shows your business model works. It also gives the lender a rough estimate of the cash in your business. These details are very helpful and particularly so with lenders who review applications in person. Lenders who use automated systems will reject a business out of hand if it’s loss-making.

Can’t show business profitability? Another sign of a healthy business is activity. If your business has an active balance sheet and can accommodate the cost of loan repayments, a lender may approve the application if they are satisfied with capability of repayment. Also, if you can’t show profitability, you can offer the lender security in the form of an asset to get a loan. This is called a secured loan.

  1. Approach independent lenders – not banks

High-street banks do not typically offer the most competitive business loans. And, in many instances, they don’t have specialised products for SMEs.

A quick comparison between a leading high-street bank (HSBC) and a leading independent lender (Nationwide Corporate Finance) for an SME loan reveals a difference in representative APR of 3.8% in favour of the independent lender. That’s an enormous difference that equates to hundreds of pounds over a single year.

Another important point is high-street banks put applications through a computerised system. If they pass that test, they get a human review. Independent lenders do not usually have computerised systems and review applications in person right off the bat. This makes for a fairer, more personal application process and a higher chance of approval.

Source: SME Web

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A Quarter of Small Businesses Would Cut Staff if They Couldn’t Access New Finance

According to new research commissioned by ground-breaking financial utility, Saxo Payments Banking Circle, SMEs are facing potentially fatal challenges in accessing finance to support the growth of their business.

“Since the financial crisis began in 2008, mainstream banks have been less willing to lend, particularly to smaller enterprises and this has forced SMEs into an unfair fight for the finance they need to compete effectively,” explained Anders la Cour, co-founder and Chief Executive Officer of Saxo Payments Banking Circle. “Our research found that lack of access to additional finance would force 25% of SMEs to let employees go. Nearly a third (30%) would have to reduce prices to encourage sales and increase cashflow, and 39% would be unable to buy the equipment the business needs.”

Over 500 financial decision makers and directors in SMEs that have an online presence responded to the research commissioned by Saxo Payments Banking Circle. Almost all (92.5%) have accessed business finance within the past five years, but many have experienced difficulties in borrowing from their usual bank.

Interest rates and fees were the biggest concern, with 58% saying they would consider finance from a non-bank if it offered lower interest rates. 44% would do so for lower arrangement fees. 25% would be attracted to a non-bank by simple online account management.

The reason for SMEs going into battle for finance varies, but buying equipment was the most common reason why they needed extra cash – for 52.9% of SMEs. Purchasing inventory came in second place (34.5%), followed by expanding into new markets for 27.5%.

The most common type of finance used was a one to three year loan, taken out specifically for the purpose. The second most common type of finance was an overdraft. And, whilst likely to be more expensive than other finance facilities, 60% of SMEs with 10-49 employees said they had relied on their overdraft within the past five years. Without that essential facility they would have had to take drastic steps to cut costs.

Ability to access finance quickly is essential for small businesses working in a fast-paced market and trying to compete effectively. However, the Banking Circle research painted a worrying picture of the length of time firms wait to get their hands on the cash their business needs. Just 3% managed to get the finance arranged within a week. 33.3% took 1-2 weeks and 36.3% waited 3-4 weeks for the finance to be arrange. 2.1% of SMEs waited up to six months for their finance – a small percentage, but representing almost 120,000 businesses across the UK.

“SMEs play a vital role in the global economy, and anything holding them back from their potential could have a severe and far-reaching impact”, continued Anders la Cour. “The business landscape is changing, and traditional lenders are not able to keep up and meet the needs of SMEs. Only financial institutions willing to adapt to new market conditions, working with third-party providers in an ecosystem model, will remain competitive and successful in the digital age.”

Source: Bobs Guide

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Women-led startups are more fundable but men receive most of the cash

A study by Access Commercial Finance found that only 16% of applications received since July 2016 were submitted by women.

The firm handled 833 applications in total during that time period, but only 135 of those applications came from women. Men made 698 applications for funding during the same period.

However, the research showed that the women who did apply for funding had a success rate 18% higher than men. 13% of applications from women were successful, compared to 11% from men.

Overall though, due to men making 84% of the funding applications, they received the vast majority of funding awarded, £4,051,052 in total. Women received £332,437.

Not only are women less likely to apply for funding than men, they also ask for less money on average when they are do apply.

Based on applications where the full amount applied for was awarded, women received £22,162 each, £28,476 less than men, who received £50,638 each on average

Matt Haycox, consultant at Access Commercial Finance, hopes the findings encourage more women to think about applying for business funding.

“This data shows us that women are on average either better at putting together a funding proposal for their small businesses, or they just have more fundable businesses. Either way, it’s potentially good news for women-owned businesses and startups.

“But given the low application rate and low funding request amount for women, men are still getting most of the cash due to sheer volume of applications.

“We hope our data gives any woman considering applying for business funding the confidence to do so.”

Source: London Loves Business