Do you remember the good old days of getting business funding? Ah yes, the days when you could stroll into your local high street bank, speak to the friendly bank manager over a cup of tea and secure a loan for your business on the spot.
That’s pretty much how it used happened, but those days are well and truly consigned to the history books. So where are we getting our precious funding for business purchases from nowadays?
Cue the “Finance Broker”. This is an individual that’s wedged between your business and the bank, or another source of available cash. Brokers are a vital part of helping your business to survive and it’s their expertise that can make the difference between acquiring a good deal, and a great deal -but how do you choose the right person for the job?
The finance broker industry is awash with large and small companies offering this service, so we’ve highlighted a couple of points for you consider when choosing the right one.
Be Clear About Your Needs and Current Situation
To allow the finance broker to secure the type of finance that’s best suited for your business, you’ll need to give as much historical information about your funding needs and your business as you can, for example, how long you’ve been trading, whether you are a limited company or unincorporated.
Other information about the assets within your company are useful for him or her to know such as:
- What is the funding for?
- Do you own your Business Premises?
- Do you own any Plant and Machinery?
- Are there any existing loans or overdrafts?
- Do you own any personal property?
- Do you have a pension?
- Do you have a business plan? A business plan demonstrates you have in mind a future forecast for your business, and a vision for success.
One important factor (which is your own responsibility) is to make sure the affordability of borrowing any money is sustainable, don’t borrow what you can’t pay back.
Ask questions about the different types of security needed for your business loan, there are many types, but some may be redundant dependant on the level of borrowing you are considering.
Bad credit history may affect access to the best deals out there, but don’t be too disenchanted as a good finance broker can work through historical county court judgements, insolvencies, and still offer terms for a business loan.
Understand the Types Of Funding They Offer
A good broker will have a whole range of business funding options, allowing them to select whichever best suits your unique requirements.
Your finance broker should make a few initial checks like, have you already called on the bank for a loan or overdraft? Were you successful, and if not why not? This is probably an area they cannot help you with and are likely to look outside of this area by presenting a few of the following:
- Pension Loans – This is a very unknown but an extremely effective way of acquiring business funding. Your own personal pension will make a loan to your business over a set term, where you decide the amount, the interest rate, and the length of the term.
- Asset Finance – In short, asset finance is refinancing existing plant and machinery which will mean it needs to be in good order and requiring a valuation to attain Its true value.
- Cash Flow Loans – Allowing you to borrow against anticipated cash flow, great if you are experiencing a temporary funding gap.
- Peer-to-Peer and Crowd Funding Loan – A growing part of the alternative finance market, the peer-to-peer market matches businesses looking for funding with investors without the requirement of a bank. Interest rates can vary considerably, but for some businesses, this ‘alternative’ finance can be ideal.
- Term Loans – Term loans are flexible loans with low interest rates and fixed repayment schedules. Great for established businesses looking to purchase an asset or fund a business purchase.
- Trade Finance – If you’re a wholesaler, distributor or importer and are experiencing low cash flow, trade finance can be used to finance the purchase of stock in order to make a profit and repay the loan.
- Export Finance – Export finance can be utilised to allow businesses to raise the funds they need to export their products and services overseas, funds and secured via outstanding payments and invoices.
- Factoring and Invoice Discounting – These options allow your business to raise money based on its unpaid invoices to customers. The lender will typically pay around two-thirds of the value of the invoices upfront, and then the remaining balance once the customer has paid.
- Merchant Cash Advance – This form of funding has become very popular in the SME market, providing extremely fast funding based on your businesses average credit card sales.
- Commercial Mortgages – Raising funds for expanding an existing or purchasing new business premises.
- Bridging Loans – A short-term loan, usually for three months to a year, secured on property or sometimes plant and machinery. These can be particularly expensive compared to commercial mortgages but can still be a good short-term solution.
- Refinancing – If you do not have any business assets, you may be able to raise business funds based on the equity in your residential property.
- Sale and Leaseback – This area of funding will require you to sell your own unencumbered equipment to a third-party finance company, allowing the cash to be immediately available in your business, and then buying back the equipment sold to them over a designated term.
As you can see, there are a number of alternative finance options for businesses of all sizes across a wide range of sectors, so it’s important that your broker understands the funding options that are suitable for your business.
Choose a Broker That’s Right for Your Business
Lastly, here are some of the things you might want to check out and consider when choosing your Finance Broker, in addition, some valuable question to ask.
Check their credentials: What businesses has the broker been used to dealing with? Be sure to check their website for case studies and reviews showing a previous success.
Where the broker is located: This is not crucial, but it might be best to meet with a broker who has contact in your locality.
What are the charges: Don’t be rushed, make sure you fully understand how much you are being charged for the service and the product. Take time to check the small print, don’t be frightened to ask if you don’t understand something within the agreement.
The rate your being charged: in some cases, this can be negotiated, don’t assume anyone gives you the best rate immediately.
Common sense: If it doesn’t feel right, hold back and give yourself time to think things through.
Who are the Lenders: How many lenders is the broker linked with? And are they familiar with the type of funding you require?
A Broker You Can Rely On
Still confused about acquiring business funding without the banks? We can help. With a range of business funding options and a wealth of experience helping businesses like yours – why not give us a call today on 0800 047 2389 or fill out a contact form and we’ll get back to you.