For many business owners securing funding is a no-brainer: simply go to the bank, make your case, and take out a loan.
However bank loans are by no means the only funding option for businesses. In fact for some businesses taking out a bank loan might even be described as “inadvisable”.
The Problem with Bank Loans
No matter how big your business is if you have any type of adverse credit, no matter how minor, high street banks and lenders are very unlikely to even consider loaning you money.
Many businesses are afflicted by mortgage arrears, poor credit ratings, county court judgements, or a number of loss making accounts. For such businesses funding through bank loans will not just be difficult, it might even be impossible.
This is one area where start-ups struggle. Start-ups and new businesses generally lack the strong reputation and the reliable track record and financial integrity that’s required to secure a loan. And with no accounts to speak of, how are they supposed to grow?
Overdrafts Are No Better
As they’re unwilling to issue loans to untested ventures many banks offer overdrafts with terms specifically designed to suit the needs of start-ups and fledgling businesses. You dip into your overdraft during your less successful months, before coming out again during your flusher months.
While many businesses rely on bank overdrafts they’re far from ideal for encouraging growth. The main problem is that they’re inflexible. Though most banks only charge on the amount you overdraw, overdrafts usually feature rates of interest that are charged above base rates.
In addition the overdraft amount is often repayable on demand. So if your business suffers through a number of less successful months – as many young businesses do – bank overdrafts can scupper your operations before they’ve even had a chance to grow. You might end up paying through the nose for interest when you should be investing in stock, supplies, or other assets.
But If I Can’t Get a Loan, and I Don’t Want an Overdraft, What Can I Do?
Luckily there are many ways to fund your business without ever having to step foot in a bank.
Even businesses with adverse credit can still receive funding in the form of Bespoke Adverse Credit Commercial Mortgages. Whether you’re a new business or an existing business looking to raise capital and consolidate debts, these can be tailored with ease to meet your funding requirements.
Why borrow from banks when you can borrow from individuals? At Goodman Corporate, we have a strong relationships with multiple innovative providers, enabling businesses of all sizes to borrow anything from £3,000 to £1m. Because we know our providers precise requirements, we can rapidly assemble applications to secure your finance within a matter of days.
One of the most secure and cost-effective means for young businesses to grow, asset financing enables you to spread the cost of acquiring a new asset over a fixed period of time. In doing this, you can release working capital so as to ensure that your growth does not jeopardise any of your current overheads.
Factoring
A financial transaction in which your business sells its accounts receivable to a third party at a discount as a means of meeting your present and immediate cash needs.
There are numerous ways to do this. With credit or debit card factoring, cash advances can be granted against future credit or debit card sales. With selective factoring, you can factor a specific debtor or group of debtors within your company’s sales ledger enabling you to release funds that might otherwise have been tied up in outstanding invoices. Finally with spot factoring you can release cash from a single invoice at any time throughout its payment cycle.
With factoring your business can essentially fund itself using its own assets. This means that you can enjoy all the short term cash flow solutions of an overdraft without having to worry about exorbitant interest rates or long term repayment commitments. Instead you can invest in the sort of things that promise a swift return – such as marketing, PR, advertising, and the purchase of new equipment or stock – and the faster your business grows, the faster your debt will be repaid.
Many businesses have thrived with bank loans and bank overdrafts, but given how inflexible this approach can be these businesses might be thought of as the lucky ones. There’s a wealth of alternative solutions out there for businesses of all sizes.
At Goodman Corporate Finance we’ve helped many small businesses and start-ups thrive with our commercial finance services. To find out what we can do for you, give us a call on 0333 3583502.