Can’t get a business loan? Here’s some alternatives.

Do you operate a small business, and have you ever tried securing a bank loan to grow? If so, you will relate with some of the issues small business owners can face when approaching banks.

With the number of hoops you’re expected to jump through, it’s little wonder that businesses are looking at alternative financing mechanisms. Some seek financial security through small business loans via other businesses; whilst others, especially start-ups, look at peddling their wares via crowd-funding solutions such as Crowdcube.

Does bank finance just appear hard to achieve?

Some things in life appear harder than they are. Securing a loan from a bank isn’t one of them. The Bank of England’s Trends for Lending (October 2014) report highlighted this. Lending to small and medium enterprises (SMEs) continued its negative trend over the last several quarters, identifying one of the significant reasons being larger businesses had access to more lending facilities.

It’s not just the Bank of England who has observed the lack of lending. The Federation of Small Businesses’ (FSB) Credit Condition Survey (October 2014) found half of small business owners thought credit availability was ‘poor’ or ‘very poor’ and that credit was unaffordable.

In fact, the Small Finance Monitor found 78% of the 5,000 businesses they interviewed hadn’t sought external borrowing.   The SME sector is seeing growth, despite big banks’ reluctance or reticence to lend to them. Over half of SMEs interviewed by the Small Finance Monitor are planning on 2015 expansion, and 14% are also seeking to borrow finance.

There are many alternative to bank lending

It’s not just banks where you can find potential to find funds, there are many alternative lenders such as independent providers of business finance solutions such as www.startpointfinance.co.uk, peer to peer funding schemes www.fundingcircle.com or look at seeking a grant rather than a loan with companies such as www.grantedltd.co.uk having access to a huge variety of available government back funding schemes.

Do your homework

Before speaking to any provider, remember it’s not all about numbers. Can you secure character references or provide case-studies to the bank? Have you had a strong credit rating? Even your personal appearance and attitude can make a huge difference!

Make sure your accounts are up to date. Could an auditor distinguish your capital from your cash flow? Banks will want to see clear accounting, identifying any assets they can count as collateral. And what are the numbers on your business plan based on? Preparation is the key to a successful application.

Could an external organisation, such as SouthWestfd, help you tidy your accounts; do your homework; or help you prepare for the questions the banks lenders will ask you?  Yes, we can, so if you are going down any of the lending routes, give us a call to find out how to get your business financials into tip top shape.