Blog: A practical guide to accessing business lending
Points to consider when making business lending applications
Dave Saddington is a Business Growth Broker at Cheshire and Warrington Growth Hub, before joining the team, Dave worked in the finance sector for over 35 years.
In this blog, Dave explains some of the basics for businesses who are wanting to get access to business lending.
There will always be the need for growing businesses to access finance and we are currently in the most challenging of times, with businesses also needing to prove their Covid impacted business can trade out of a period of declined turnover and loss making.
The Government’s Recovery Loan Scheme was launched on the 6th April 2021 and will be available for applications to 31st December 2021. It can be provided by your own bank or there are approved alternative lenders with details on the British Business Bank website and the Growth Hub can provide support for applications. The business must be considered viable and serviceability must be proved by producing financial accounts and projections.
Here are some key points to consider in connection with business lending applications :-
Maintain good communication and request support from your bank and accountant. Even if your bank declines an application it’s worth giving them a try and they will have good access to your past performance through the bank account.
All lenders will want to see the latest 2 years annual accounts and up to date management accounts will be required to bridge the gap to date. Businesses that have been trading before the Covid period will be able to prove past performance and how the business has been affected by the pandemic.
It will also be necessary to produce a minimum of 12 months financial projections showing how the business can afford increased loan repayments in addition to meeting existing commitments – if the business is relying on increasing turnover there will be the need to prove these figures are accurate.
A lot of alternative lenders use algorithms to access an application and credit ratings will play a part in this assessment – it’s therefore important to know your current Business and Personal Credit Rating as it may be possible to increase the rating before the application. There are specialist businesses that will advise and make changes subject to agreeable fees to improve the ratings plus maintain ongoing vigilance on the ratings to support the business.
Work with your existing lenders to explore options to spread the repayments if possible or look at the possibility of raising cash against business assets and even consider injecting personal funds into the business from your own assets.
If your funding options are restricted it may be an option to consider attracting fresh investment into the business from other individuals or institutions.
If the business is unable to raise new funding and you are unable to pay commitments as they become due please take professional advice as soon as possible – your accountant will be able to provide advice but you can also have initial discussions with insolvency practitioners and early action could still save the business.
For further support with accessing finance contact the Growth Hub