Business Finance Options

Many but not all financial institutions can grant borrowing requests very quickly and with a comparatively minimum level of fuss and information requirement. This is because lenders may rely on the results of a positive credit score and the trends intuitively assessed from an existing client’s bank account operation over the previous (say) 12 months. Such decisions generally relate to lower amount borrowing requests for eligible loan purposes.

Computer driven lending decisions have been prevalent in the UK for well over a decade but there are also still lending organisations which operate with a level of human judgement still part of the underwriting process. The approach adopted by a lender will often dictate the information requested.

Generally speaking for higher monetary value and /or more complexed proposals lenders are entitled to ask borrowers for a comprehensive suite of information which they will assess and evaluate prior to coming to a decision on whether to lend to any business and the individuals behind it.

This is only fair as the lender is often asked to lend not insignificant amounts of money and so there is always an inherent level of risk to that lender; a risk which they would always wish to quantify and mitigate.

Typically information will relate to not only the business but also the principles behind the business. Historical financial information and forecasts are routinely requested, but also personal as well as business bank statements for periods of between 3 months to 12 months; with 3-6 months being the most common request.

Business plans are often requested for clients new to lenders, although borrowing from an existing lender will often negate this particular requirement, with the lending official conducting instead a fact find in order to produce a credit paper.

Credit searches are also routinely taken by the vast majority of lenders, with a varied level of flexibility depending upon the nature of any adverse information revealed.

Lenders information requirements do vary between lenders and so can the pricing of borrowings and the terms and conditions stipulated. 

If your finance is rejected, a request can be made for terms to be negotiated. This may or may not be possible depending upon the lender.

Many lenders are rigid on the pricing they offer and the terms and conditions they stipulate to clients. Often, such finance offers may only be varied by exception.

The phrase "risk and reward" refers to the fact that if a lender is prepared to back a proposition with a higher level of risk, then that risk will often command a reward in terms of a higher interest rate and general pricing. Riskier lending requests in the eyes of the lender may also dictate that pre-drawdown loan conditions and post-drawdown caveats are attached to the lending agreement. This is the lender's prerogative.

 However, borrowers always do have the option of seeking alternative funding arrangements. Shopping around enables comparisons and often achieves a more preferential deal.

Market conditions and economic trends are considered by lenders when setting their lending policies. These relate to factors such as the number of competitors, the state of the economy, and the level of competitiveness at the time of the investment. These will affect the availability and terms of any business finance options available from them at any given time.

Your chances of securing funding will fundamentally come down to your evidencing and ability to service the borrowing being requested from a track record of profitable trading, or perhaps from an increased profitability forecast as a result of deploying the funds being sought.