Business finance is a great tool for expanding and building small- and medium-sized enterprises (SMEs). But this is only true if you are entering into the funding partnership for the right reasons. Before you seek business finance or alternative funding, ask yourself the following questions. If you’ve answered yes to most of them, you may be ready to consider asset finance.
1. Do you have good credit?
The first thing any finance provider will do is check your credit history. If this includes previous business defaults, insolvencies or illegal activity, you are unlikely to be eligible for business funding.
2. Do you know what kind of business finance you need?
There are many different types of business finance available to UK SMEs, depending on the nature of your business and the reasons you are seeking funding. For instance, invoice finance can be a great solution to short-term cashflow issues. However, for longer-term funding, corporate bonds or fixed-term loans may be a better fit. If you only apply for the most suitable funding for your business, you are a lot more likely to avoid rejection.
3. Do you know (exactly) how you would use the funds?
Every funding provider wants to know how you plan to use the funds that they are lending you. And the more detail you can offer, the better. For instance, if you plan to use the money to extend an existing store, you should expect to be asked for the relevant planning permissions, architects plans, and a timeframe for completion.
4. Do you have a plan to pay back the loan and interest?
This seems like an obvious point, but it is vital that you fully consider how you plan to pay back the loan and the interest payments. In fact, many finance providers will ask to see proof of your ability to pay, either by looking at your order book or your previous income.
5. Do you understand the risks involved?
Borrowing money always comes with risks – the main one being that you will not be able to pay it all back. Most finance providers will ask you to put up some sort of collateral (e.g. your business premises) before offering you a loan. This means that if you default on your loan, these assets could be seized. Make sure you can afford the worst-case scenario before you sign up to a financing contract.
Seeking business finance – where to find out more
We can source many different types of business finance for our customers, whether it’s for business expansion, cashflow, asset investment, stock – or any other reason. Read our page “Alternative Finance” to find out more. Then get in touch and we can discuss options available to you and how we could help.
Image: Finance by Witches Falls Cotages licensed under Creative Commons 4.0
