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Category: Finance

Many small businesses need capital or small business finance to help them develop, and there have never been more funding options available, from traditional bank loans to leasing deals and even grants. But the type and terms of the funding could have a critical effect on your business’s long-term future, so it’s important to choose wisely. Some of the options available are listed below.

Short-term Finance

If a company has lots of expenses to pay or needs money to see it through a rough patch then a short-term loan, usually lasting up to three years, could help ease its cash flow worries. The attraction is you will usually pay less in interest than if you spread your repayments over a longer period, but your monthly payments will obviously be much higher.

If you need the money to buy equipment for your business then you could also look into leasing. Many companies will arrange financing for small firms to encourage them to buy their goods and there are good deals on offer. In the last couple of years, the drop in business loan applications was partly attributed by the British Bankers Association to more small businesses agreeing alternative funding, implying that many firms have found other finance facilities to be cheaper and easier to obtain than bank loans.

Medium to long-term Funding

Longer-duration lending agreements, usually five years or more, suit companies that need to repay the money slower, because the monthly repayments won’t take such a bite out of their working capital. That can be good news for companies that know it will take them longer to get off the ground, or expect to see slower returns on their investment, such as setting up a new office.

How much a firm will repay will depend on the loan’s interest rate, which can either be fixed for the duration of the finance, or could vary, meaning the amount you owe could change according to the economic conditions.

These loans only tend to be offered by the high street banks, which are still rather reluctant to lend to small businesses and they would expect you to provide a detailed business plan and cash flow forecasts to back up your loan request.

Secured Lending

The other big factor in how much interest a company pays, apart from the length of the term, is whether it opts for a secured finance facility. A secured, or asset-backed agreement is one where the borrower has pledged ‘security’, such as its vehicles, equipment or even office, which can be taken by the lender to pay off the outstanding amount.

Some small or start-up companies might not possess any assets that could be used as security, in which case its owners or directors might be asked to use their own properties to secure funding for their business.

Many new businesses won’t be able to provide several years of accounts, which may prevent them from getting a bank loan but, don’t worry, there are other options available to you.

Alternative sources of funding

Several new options have emerged as a result of banks’ reluctance to lend to small businesses since the global financial crash of 2008. The government stepped in to in theory help the riskiest prospects: new businesses. It’s Start-Up Loan Scheme provides no-fee, unsecured personal loans of £500 to £25,000 for up to five years. It claims to offer successful applicants free mentoring advice and exclusive business offers to help get their businesses on their feet. However, it has been reported that these facilities have proved very tricky to get accepted for, in the same way, Grants can be too. Some also say that it can take up to 2 months to get a simple yes or no so you’ll just need to be patient.

To get a start-up loan you need to pass a credit check, show your business is viable through a business plan and cash flow forecast, as well as provide a “personal survival budget” which explains what personal income you have to survive (and to repay the loan).

Nationwide Corporate Finance can help raise the funds you need for your business in many different ways, you can use them for any purpose and our flexible terms can fit in with any budget.

Please call 01234 240155 to find out more or visit us on www.nationwidefinance.co.uk.

If you are looking to expand your business, access to finance is absolutely critical.

Forward-thinking businesses are using the current economic environment as an opportunity to expand into new markets, to launch new products and services, to evolve and generally to win new business, which means procuring the resources required to springboard forward and achieve an ambitious business plan!

Unfortunately, big high street banks are typically not currently inclined to help businesses to access that vital finance, despite the government supporting lending; however, a new wave of specialist finance firms has stepped in to fill the gap.

Introducing Nationwide Corporate Finance

One of the most popular names in specialist business finance is Nationwide Coporate Finance. We offer alternative finance at very attractive rates for businesses that need to access flexible, affordable funding quickly. Whether you need finance to grow, refinance, bridge a gap or to refit your premises, we have something to suit.

Our interest rates are attractive and we offer flexible repayment schemes to suit.

We are also active in the field of asset refinance and offer loans for all types of business purpose, including part-finance through to 100 per cent finance and offer repayment periods from twelve months through to five years.

Fast and effective

We make lending decisions in just three hours and accept 98 per cent of all business customer applications – we are guaranteed to be open and ready for lending! All that we ask is that you have been in operation for at least a year and that your business is UK based. We process loan applications quickly and can have the funds in your nominated bank account in just 24 hours. Remember, all your payments on business loans are 100 per cent tax deductible!

Get in touch

Our friendly and experienced team is on hand to advise and help you with your application and will ensure that you can access the finance your business needs to grow, thrive and expand.

 

Contact us today to discuss your needs, or complete our web callback form and a member of staff will be in touch at a time that suits you.

Carrying out a Fleet Review?

If you are keen to keep your operational costs low whilst making carbon savings for your business, there are many new makes and models available which might offer all of the necessary benefits.

Given that organisations are keen to get new deals in place with uncertainty looming, we sense this might be a good time to look around. Highly flexible fleet finance provision models are also possible, allowing you to access vans and business vehicles on a flexible basis, rather than having long and expensive leases on an individual vehicle basis.

The Finance You Need

If your strategy review demonstrates that there is room for improvement and a chance to reinvest to improve your fleet management and delivery, we can help you. At Nationwide Corporate Finance we offer a range of business finance, with flexible lending models to suit, and we offer generous terms and conditions, designed to suit the needs of business customers.

Our Offer

Because we are a small and nimble operation, we can offer finance from £10,000 to £500,000 and from just twelve months in duration to five years. We are very much open for business and guaranteed to consider your application, regardless of credit history, and in fact, we accept 98 per cent of all customer applications, unlike big banks which tend to impose onerous conditions or turn new business away in the current operating climate.

We can finance all kinds of business requirements – whether you need to invest in a fleet, refinance existing equipment or part-finance an investment. We also offer flexible payments to suit your income cycle, including variable and fixed payments.

Our Team of Experts

Our finance experts are specialised in helping businesses to access the flexible finance that they need and you will find the service rapid and friendly.

From the point of application, we make a lending decision in just three hours and the funds can be in your bank account in just 24 hours.

Year after year and survey after survey, business owners list access to funding as the most challenging part of growing their business.

Independent Businesses report that of the smallest businesses (10 employees or less), almost 50% have applied for some type of financing in the past couple of years.

Of these, almost half of them are turned down.

If you’re considering applying for financing this year, every lender – including banks, credit unions, and online lenders – looks at the same five categories of credit. Although the credit categories are the same, the credit scoring models that banks use can be drastically different than the credit scoring models that an online lender uses.

For example, for Bank Finance Applications you need to show five years of profitability, whereas an online lender will consider new start businesses through to established businesses. Regardless of the “scoring” techniques here’s what every lender is looking for…referred to as the 5 C’s of credit.

Character

Simply put, this is your reputation. When lenders evaluate character, they look at stability. For example, how long you’ve lived at your current address, how long your business has been open, how many years of industry experience you have, and whether you have a good record of paying suppliers and bills on time and in full. These days, social media profiles, activity, comments, and reviews of your business make it much easier to measure the “character” of you and your business.

Capacity

This is arguably the most important factor a lender will consider in deciding whether to lend you money. It is essentially whether you have the capacity (ability) to make repayments. Most traditional lenders have a sophisticated debt to equity model but for the most part, your current bank statements illustrate how/if you can meet the payments.

For example, if your average monthly ending balance is £1,000 and the repayment is £3,000 per month you probably won’t qualify.

Capital

Capital refers to the value of your assets minus your liabilities. In simple terms, how much you own – minus how much you owe. The more capital/investment in your business the better your chances of getting financing.

Collateral

In most cases, the Finance Applicant will be asked what assets he/she can provide to secure the funding.

For example, if you own a home, car, or other personal assets, those will be considered when a lender decides whether to grant your application. The more collateral you have, the more willing a lender will be to provide funding. Some online lenders don’t require collateral but it almost always helps improve your “score.”

Conditions

Lenders consider a number of outside circumstances that may affect the borrower’s financial situation and ability to repay. The local economy, the industry, and the level of competition are factors every lender is looking at. For example, if a business was in the oil and gas industry in 2015 chances are they found it difficult if not impossible to access working capital finance.

Although every lender looks at the 5 C’s of Credit, some – like Nationwidefinance.co.uk tend to put more credit scoring “weight” on the business itself.

On the face of it a computer or Mac isn’t much money, but when you multiply the number of workstations you need and consider other equipment like servers, and then the furnishings like office chairs and desks people need to do their jobs, the costs to equip a web studio soon stack up.

The biggest costs are the electronics and the cost to equip a small web studio with four workstations is around £15,000.

If that sounds a lot, consider the cost of a mid-range 27” Mac — £1,949 at the time of writing. Most web studios have a mix of Mac and PC, and if you want to give a developer a good PC to do their job, you’re looking at over £1,000 including the two 4K monitors they’ll want to use (a web developer must have).

Then you have your telephone system, dedicated server which you host your client’s websites on, the IT infrastructure to run it, and printers and scanners.

And let’s not forget about the desks and chairs you need, or the office furnishings so people aren’t working in a boring box all day.

That £15,000 figure isn’t looking so expensive now, is it?

Financing everything

£15,000 is actually a conservative figure on our part – you’re looking at £2,000+ per workstation for Macs and £1,000+ for PCs. And these are only part of the studio itself, even if they account for the bulk of the cost.

Assuming you ultimately want to own all this equipment, the easiest way to finance the expensive stuff – your Macs, PCs, servers, etc. – is to purchase everything in one go on a hire purchase agreement with a specialist lender.

A specialist lender can purchase everything you need for your studio under one hire purchase contract. This has three benefits:

  1. It keeps your monthly repayments as low as possible
  2. It means one single payment per month, not several
  3. The monthly payments are fixed and can be offset against your tax bill

A hire purchase is a simple finance facility in which a lender purchases equipment on your behalf and you pay them back over a set term.

Once this term comes to an end and you have repaid what is owed, your contract with the lender ends and full ownership of the equipment passes to you.

It is simply a means to spread the cost of purchase to make payments palatable. You can take out a hire purchase over 12 to 60 months. A lower term means you will pay back less overall, but the monthly repayments will be higher. A longer term means you will pay back more but the monthly payments will be lower.

Only a few specialist lenders can purchase multiple assets under one hire purchase agreement and our sister company Blackrock is one of them. As a broker, we can introduce you to these products and help you secure the finance you need. Call us anytime on 01234 240155 to find out more and we’ll do our best to help you.

Acquiring expensive equipment outright isn’t feasible for everyone, and even if it is financially, there may be no point if the business only intends to keep hold of the equipment for a short time – i.e. for only part of its usable life.

This is where a finance lease comes into play. With a finance lease, you get unlimited use of equipment over a period of time, after which the asset is returned.

If the lessee plans ahead, this means it’s possible to take out a new lease as the old one ends and acquire newer, even better equipment with low initial outlay.

There are six other key benefits of a finance lease for your business:

Small initial outlay – this can be as little as one month’s rental. Increasing your initial rental has the effect of lowering your monthly payments.

Monthly payments – these are spread over a set term dependent on the value of the equipment, and what is manageable for you.

Opportunity to extend – finance leases often give you the opportunity to extend the lease at the end of the agreement. An example of where this may be desired is if you still need the equipment to fulfil an order or contract.

Opportunity to sell – you can also opt to sell the asset at the end of the agreement. If you choose this option, the sale will be managed by the lessor and most of the profit from the sale will be passed onto you (if there is any).

Tax deductible – the monthly rentals of a finance lease are fully tax deductible. The VAT on a finance lease is also fully reclaimable as a capital allowance.

Keeps cash in your business – this is perhaps the most important benefit for businesses without the luxury of a cash stockpile. A finance lease does not require a large initial outlay or payment further down the line. This keeps cash in your business and doesn’t disrupt your cash flow to any great extent.

What can be purchased on a finance lease?

Finance leases are most popular with vehicles of the domestic, commercial and industrial varieties, as well as plant equipment, machinery and electronics like computers.

Mostly however this finance facility is used to acquire high-ticket items because there is a balloon built into the agreement which isn’t repaid during the course of the agreement.  This has the effect of lowering monthly rentals considerably versus a hire purchase, which is where you pay off the full purchase price over time.

Ultimately, you will never own the equipment leased on a finance lease, unless you trigger an option to purchase. The benefit of this is lower payments over the course of the agreement. The downside is if you do opt to purchase, you will end up paying way more than on a hire purchase to begin with. For this reason, a finance lease is best used to acquire assets you do not intend to own outright.

Buying a business with finance is the simplest way to go about it, other than the buyer fronting up the cost themselves.

Depending on the amount involved in the transaction, you will need unsecured or secured finance from a specialist lender. The typical ceiling for unsecured finance is around £25,000 so most acquisitions will involve secured finance.

Lenders prefer secured finance for larger amounts because the amount is secured against property as a failsafe. This fact means you enjoy lower rates versus unsecured finance which will drive the total cost of purchase down.

Here’s what you need to do to get started:

Get the business valued

To raise finance with any lender you need a solid valuation of the business. Valuating a business is not a simple exercise so should be outsourced to an independent, reputable evaluator. And always, always get a second opinion. Only when you understand the value of the business should you proceed.

Raise your own money

It’s important you know that with any business purchase you need your own money too. Lenders are unlikely to fund the whole purchase price. You must assume some of the risk. 30% is the golden figure to aim for – that’s 30% of the total purchase price of the business in question. And the higher the better.

Collect financial information

Lenders will want a high level of insight into the business being purchased. They will want to review the business’s unaudited and audited accounts and review bank statements to determine solvency. Also, they will want to determine the financial status of the group or individuals buying the business. This is necessary for due diligence.

Demonstrate skills and knowledge

Lenders base their lending decisions on risk. Someone who knows what they are doing, either through experience or study, is far less of a risk than someone who doesn’t have any experience or knowledge. A cover note detailing your experience and how it is relevant to a takeover goes a long way to providing reassurance.

Create a professional business plan

Just because you are buying an established business this does not mean it will continue to be successful. To show it will be, a professional business plan is absolutely necessary to answer the lender’s questions and reassure them. You need to explain how funds will be used and how the business will be run. You also need a forecast, profit and loss account, up to date balance sheet and cash flow figures.

Find yourself the best possible finance

The quality of a finance product is determined by the lender, but there are variables you can try negotiating or tweaking to your needs. Fees, rates, payments and early settlement charges are the four variables in question. These differ from lender to lender. Do shop around for the right product but save your applications for the good ones (if you apply for finance too many times in a short period, this can count against you).

If your retail business is struggling with cash flow, there are actionable steps you can take right now to improve the situation. In this article, we’ll cover a few finance and fundraising options available to you.

  1. Consolidate existing debt

If you have several existing finance agreements, it makes sense to consolidate these into one larger agreement. This could reduce the overall amount you pay and will certainly make keeping up with your repayments easier.

It is possible to consolidate multiple refinance agreements into a new one and consolidate hire purchase agreements and finance agreements together. However, this depends on your lender so ask them about the possibility to do so.

  1. Seek a new payment merchant

As retail businesses grow one of their largest ongoing costs are transaction fees or payment fees. 1.5% of each transaction is normal with online businesses. A new payment merchant could offer you a much better rate to reduce your expenditure.

A small percentage decrease in transaction fees could make an enormous difference to your bottom line. You can try negotiating with your payment processor if you process lots of transactions or expect to see growth in the coming year.

  1. Liquidate excess inventory

Most retail businesses struggling with cash flow are struggling because all their cash is tied up in inventory. If this is the case and you need rid, it makes sense to liquidate it to raise money and hopefully claw back what you paid for it.

Put excess inventory on sale, list it on eBay or Amazon, bundle items with other products (such as a free X when you buy Y) or do buy one get one free offers. Pricing strategies can be a god send when you have excess inventory to get rid of.

  1. Make use of invoice discounting

Invoice discounting enables you to leverage the value of your unpaid sales ledger as a short-term solution to improving cash flow.

it involves leveraging money you are already owed. What invoice discounting does is advance you a proportion of the invoice amount. This is usually up to 80% of the invoice total which may be enough for your needs. If you are struggling with cash flow because you have unpaid invoices, this is a relevant solution.

  1. Release money tied up in assets

If you have valuable assets such as a POS system, computers, or machinery free from finance, you can release their value by refinancing them.

With such an agreement, a lender buys the asset from you and hires it back to you for an agreed term. This is not a loan; it is a simple purchase and hire back arrangement. You get to keep hold of the assets in your business. Come the end of the agreed term, assuming all fees are paid, ownership of the asset will pass back to you.

To find out more about refinance, call our team on 01234 240155. We have helped hundreds of retailers improve cash flow with it.

If your business has not started trading yet you can still take out finance, although the business must have been incorporated in the case of a limited company or registered with HM Revenue and Customs in the case of a sole trader.

Because you have not started trading yet you will find the number of lenders you have access to is smaller than if you were already trading. This is because many lenders want to see some history of trading and won’t lend to those who can’t show it. This would ordinarily be three to four month’s bank statements.

With this in mind, you will be required to provide other forms of reassurance to show you have means to repay what you borrow. These include:

Personal guarantee

A personal guarantee makes the director liable for the business’s debt in the event the business becomes unable to repay it. This is nearly always necessary with new business or start-up finance to mitigate risk.

Professional business plan

Because you are a new business your lender will want to see a professional business plan so they can get to understand your business. This will include financial projections and profit and loss with an explanation for how the money you borrow will be used. This insight will be invaluable for the lender in their decision.

Credit score

Whether you are a limited company or a sole trader, your personal credit score matters because you are signing for the finance on the dotted line. Your lender will access your credit history through a company like Experian or Equifax to confirm your personal details, see how much debt you are in and see if you pay back well. A bad or poor credit score isn’t a deal breaker, but it could limit your opportunities.

Collateral

If the amount you wish to borrow is over £25,000 or you have a bad or poor credit score, you will likely be required to provide collateral to secure your finance. This is especially true if you haven’t started trading yet. Collateral can be real estate, property, vehicles, machinery or anything else within reason, so long as it covers the value of the finance and is owned by you. It can’t be on finance already.

Types of finance for new business

Depending on how you intend to setup and operate your business, you will need unsecured finance or secured finance.

Unsecured finance has a lower finance ceiling, but it doesn’t require you to front up anything to get it. You will still be required to provide a personal guarantee though, which means it isn’t completely risk-free.

Secured finance has a finance ceiling up to £500,000 and is used in cases of larger amounts and in cases of poor or bad credit history. A personal guarantee is often still required but in return you get lower fees and rates.

If you would like to find out more about these finance types and which is best for your use case, please call us on 01234 240155.

Unsecured loans from banks can be tricky to secure if you have a poor or low credit score, or little credit history at all. The reason is risk. Banks risk profile each customer, largely based on what they see in your credit report. If their computer doesn’t like something, then it will spit your application out and say no.

The trouble with this is you rarely get an answer as to why. But more frequently than not, it’s because the amount you want to borrow is too much based on your credit profile. This is usually caused by a poor credit score.

Hire Purchase

One of the savviest ways around this in the case of making an equipment, vehicle or machinery purchase is to use a hire purchase agreement.

Under a hire purchase agreement your lender buys the asset for you and then hires it back to you over 12 to 60 months. At the end of the agreement, you own the asset, and your relationship with the lender ends.

You can look at this as spreading the cost. The actual cost of borrowing varies from lender to lender. In the case of unregulated finance, which is popular with businesses, the cost of borrowing is determined by the monthly fees. This is added onto the cost of your payments, the same as an interest rate would be.

The reason a hire purchase is easier to obtain than an unsecured loan is because the lender is effectively making a purchase of an asset which they then hire back to you. The lender becomes the owner of the asset. So they purchase an asset and retain ownership for the duration of the contract. This brings reduced risk, because if you default on your payments, they can just repossess the asset in question.

Risk and fees

This is the main risk to you – risk of loss. However, this is the same as with any type of finance. Loans, secured credit, unsecured credit – whichever type of finance you look at, all have some risk of loss. The difference with a hire purchase is the amount is secured against whatever the asset is. So loss in this case is the asset.

Applying for a hire purchase is much the same as with an unsecured loan, except the content of the application includes the asset, or ‘Goods’. Your payments should be fixed for the duration of the agreement, so you know exactly how much the cost of credit is.

You can work out the cost of credit by deducting your fees from your payments and multiplying them by however many months the agreement runs for. Make sure you also include the Purchase Fee, if applicable.

We can assist you in securing a hire purchase agreement for equipment, vehicles or machinery for your business. Contact us today to find out more. You can reach us on 01234 240155 or email us at hello@nationwidefinance.co.uk.

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