How to improve your business’ chance of getting finance
Just as in our own personal lives, managing your business’ finances and building up a good track record of careful financial management means that you are more likely to be considered favourably when you need to borrow money. Read more about building up your business credit score here.
It sounds simple, but whether you are just starting out in business or well-established, the ability to use business finance to enable you to expand or grow operations, or simply to trade during tough times, can be life-changing. Many firms discovered this during the recent pandemic and used Government-backed schemes such as the Business Bounce Back Loan and Recovery Loan to enable them to continue to operate during a period of global disruption.
While these schemes have now finished, there are still a wide number of business finance options available, including asset finance, cashflow finance and invoice discounting. With many predicting challenging times in the months ahead, due to rising inflation and operational costs, it could be time to review these with a broker to ensure that your company has funding in place, should it hit a bump in trading.
Why do SMEs fail to receive funding?
A recent survey by smart payments platform Yolt revealed that a third of SMEs who applied for finance were rejected last year, losing an estimated £3.7bn in potential funding during 2021.
In the study, the average SME sought to borrow £331,275 in finance to help grow their business, yet only managed to borrow £50,000 less than this. The key reasons why they were denied funding was the age of their business (31 per cent), the amount of existing debt they already had (22 per cent) and a lack of suitable collateral (20 per cent), and, interestingly, medium-sized businesses were most likely to refused funding (56 per cent). Additionally, even if successful in securing funding, only one in five SMEs described the process of borrowing as easy.
How to find the right lender for business finance
One of the biggest advantages any company can give itself when applying for business finance is to work with a commercial broker. This single piece of advice has changed the outlook for many businesses, particularly during difficult times, as a professional broker will look at your company’s finances objectively and often identify opportunities which you may not even have spotted. For example, your firm may have hidden assets which you may be able to use as collateral to borrow money against, or you may be able to access a cash advance if your company takes regular card payments.
Additionally, a commercial broker will often be able to help you access specialist types of funding from lenders which focus on particular sectors or industries. While one of the most searched for terms is ‘business loan’, this is a highly nuanced area and there are numerous types of finance available to companies which you may not ever have heard of. Think of your own business’ area of expertise, equipment and technical terms which the average layperson would never have heard of – now you can see how a commercial finance broker has the knowledge and expertise to help create a bespoke finance plan for your business.
What if I’ve already had a business loan application rejected?
Even if you have already applied for business finance and been unsuccessful or received a limited offer from a traditional lender, it is still possible to work with a broker to explore other areas of business finance and achieve a successful outcome.
None of us can predict the future, but with rising material, energy and fuel costs, increased inflation dampening consumer spending, along with rising taxation, by acting now you have the opportunity to put funding in place to maintain your regular cashflow and protect cash reserves. While a pandemic may have been the first time that your company used business finance, funding can be a valuable tool to ensure your firm continues to weather tough times and succeed.
See more Asset finance / Cashflow / Commercial mortgages / Vehicle finance articles here
