We all hear on the news that the banks don’t lend and businesses suffer through lack of that support. But why don’t they lend and where can SMEs go for help when a business has a viable product or service but all that it needs is finance?
Firstly, contrary to what we see and hear in the media, banks still provide lending to businesses. However, their criteria have changed as they had to tighten the rules. For too long did the banks provide finance to businesses that would not be able to afford it or would not qualify for. In addition to that, was it the right type of finance in the first place? But let’s not dwell on things that happened in the past. It’s onwards and upwards, as they say...One good thing that some banks are doing is actively trying to help businesses by providing information on how to manage your money and trade through the economic downturn. One of such banks is RBS with their Money Sense for Business. Have a look at their latest information page.
If you are looking for finance for your business, firstly, identify what the loan is for. Is it for training? Purchase of assets? Or another type of project in your business? This will provide you with a number of options of what type of finance you would need and where to go for it. There are numerous options out there on the market. If you are not sure what finance to apply for, click here for help and speak to your accountant or another independent specialist / business advisor who will be able to advise and help you.
- Get your Business Plan up-to-date
- Clearly state what the finance is for. Outline how this finance (or what it is for) will assist your business
- Do your research. Find out who your main competitors are and what makes you stand out from them
- Get your financials in order: it is usually a requirement to supply 3 years’ accounts for established businesses.
- In some cases lenders would accept Management Accounts
- Get your business and personal bank statements for the last 6 months as some lenders will not consider your application without them
- Prepare a details cashflow forecast. Remember, you must demonstrate that you can afford this borrowing and it will not drain your business and personal finances
There are also other options for businesses, such as De Minimis Aid, which includes various schemes either provided or supported by the government. These include:
- Small Firms Loan Guarantee Scheme (SFLGS): this is where a security is required by a lender, but it is not available from a business or its owner(s). If a business is qualified for such a scheme, the government will underwrite 75% of the loan. You may still have to find the remaining 25% worth of security though
- Government grants through Business Link and Local Authorities
- Train To Gain
Contact the relevant body to seek further information.
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