Business Finance FAQ

Who is eligible for business financing?

In principle any company can qualify for some form of business financing, but in practice the most favourable deals are likely to be given to the companies which seem the most attractive credit prospects. With this in mind, as soon as you start thinking about financing options, it’s a good idea to double-check that your business plan and financial statements are completely in order. The better they look, the more attractive your company will look to lenders. If your company is a start-up then you will only be able to give projections, so make sure that they are realistic and substantiated.

What kind of financing options are available?

These days there are all kinds of different options available to suit different situations. If your main need is to keep cash available so you can keep your business running smoothly in between invoice payments, then you may want to look at options such as invoice discounting, merchant cash advances and invoice factoring. These all work along the same lines in that the lender is advancing funds based on money the company expects to receive, the key difference it that with invoice discounting and merchant cash advances, the borrower manages the billing process, whereas with invoice factoring, the lender takes ownership of it. There are also general business loans and loans for specific purposes such as tax loans and asset financing.

How do I go about picking the right lender and the right product?

Picking the right lender and product for your needs starts with knowing what your needs are, so before you go any further, you need to know the answers to 7 key questions.

  • How much money do you need?
  • What is the purpose of the financing?
  • How quickly would do you need the money (or how soon would you like to receive it)?
  • What is your time frame for paying back the money?
  • How long have you been in business in general and running this business in particular?
  • What story do your financials tell about you?
  • What collateral can you offer?

 

Now you can start looking searching the internet and seeing what is available to you and from whom.

Your initial triage should probably be just to strike off lenders and products which are clearly unavailable to you or obviously unsuited to you, such as lease products if you want to own an asset at the end of the agreement or hire purchase products if you just want the use of an item rather than to own it as an asset. The good news is that this is generally fairly straightforward in that it’s fairly common for lenders to state their minimum requirements for their products clearly on their website. In the event that they don’t, you will need to decide whether to contact them for advice or just move on to someone else.

Once you’ve completed this initial triage, you should have a list of lenders from whom you appear to have a reasonable chance of getting credit in some form. Your next step should probably be to rank your lenders in order of preference. This is where online reviews can be so very helpful. Obviously cost will almost certainly be a factor when you make your final decision, but you also want to work with a lender who has a good reputation for customer service and actually taking the time to understand their clients’ businesses rather than just adopting a “one size fits all” approach. Basically if your research leads you to discover that a lender has a questionable reputation with their existing/previous clients and/or there are negative press articles about them, then you probably want to move on unless there is a very compelling reason to continue to look at them.

Once you have picked your potential lenders, you can discuss their product range with your accountant/finance team and/or get in touch with them to see what suggestions they can make.