Obtaining Business Finance

I need finance for my business – where should I start?

A business loan can be used for a number of purposes, including:

• boosting working capital
• purchasing an important business asset or piece of equipment
• paying off crucial liabilities
• expanding or growing the business

What does it take to secure funding?

The first step is to understand the purpose of your business finance. For example, short-term bank loans and overdrafts are suitable for covering temporary cash needs, but can be risky if used for funding long-term needs. Specialist finance, such as asset finance for business equipment, is often available at better rates than general business loans.

It’s advisable to carry out thorough research in order for you not to underestimate or overestimate the amount of money you need. Underestimating could lead to financial problems in the future, or a lack of funds earlier than you had forecasted. Overestimating may lead the bank to question whether enough research and planning was was done before writing the business plan. To avoid any doubt, ensure you present a budget with proper financial projections.

Comparing your bank’s commercial loan terms

Sometimes, banks can offer a competitive deal – and it makes sense to start with the bank holding your business current account, as they are likely to already know your business. Banks will limit their business lending to any single business, in order to manage their risk, and will often require additional security.

A bank may use the Government’s Enterprise Guarantee scheme to help it offer a commercial loan. Be aware that there is a 2% fee each year, and they are known for being strict on the loan repayments. The Government now requires banks to offer to refer unsuccessful business loan applicants to specially selected finance websites, which can help the business find another source of commercial finance. Using a business finance broker is likely to be the easiest and most effective way to find a commercial finance loan.

Using a business finance broker

A finance broker is a “go-between” who usually arranges loans for a fee (paid by you, the lender, or both). A finance broker deals with the lenders and arranges a loan for you.

There are over 100 business finance lenders in the U.K and rates can vary considerably depending on their specialities for different products and different types of customers. A business finance broker can often obtain better terms by going direct to lenders. Equipment finance offered by manufacturers or equipment suppliers is sometimes subsidised with items such as interest-free credit, but better deals can often be obtained through a business finance broker.

Understanding the finance agreement

Check the total cost of the agreement, including any possible fees or charges that might not be included in the main interest rate. Invoice discounting and factoring are complicated products and expert advice from a specialist finance broker or accountant is advised.

If your finance is arranged by an equipment supplier, you might be promised things that are outside of the finance provider’s agreement, such as free accessories or supplies or transfer of ownership. There’s a risk they might not be honoured if the promises aren’t in the finance provider’s agreement. If you are using a reputable business finance broker, they should help you to understand the finance agreement and ensure that the terms are reasonable and competitive.

How we can help

Seeking finance for your business may seem daunting, and you’re likely to have heard numerous horror stories about how long-winded and complicated the process is. At Swoop, our aim is to make the process of acquiring funding as stress-free as possible. We combine our advanced matching algorithm with decades of funding experience to identify the best options for your business. All your options will be presented to you clearly, so you can make the decision based on your business goals. Not only that, but we do all this very quickly!

If you’re a budding entrepreneur in need of funding for your business, visit www.swoopfunding.com and let us take the pain out of searching. We’ll do the heavy lifting across the entire application process, so you can focus on building your business.