get a business loanHow to guarantee to get a business loan

SECURITY – Part One

The first requirement is to understand the market, all business, individual and institutions have one thing in common when lending money, they want to be certain they will not lose it. So if you are expecting the funder to just lend you money you will fall at the first hurdle.

The way to get over the first hurdle when trying to get a business loan, is realise that without a form of security you will fail. Then start to think about the types of security required, these generally fall into two key areas.

Secured Lending

– You need to provide a charge over something that you or your business owns. If the wort happens the lender can and will try to recover the outstanding loan by releasing the value in the asset you have provided a charge over.
This can be a building, equipment, your order book, the debtors ledger or in most cases all of the items mentioned before in a floating charge. We will discuss charges and fixed and floating in another post.

When there is noting that the lender can secure on in the business, they will often take. Charge over personal assets. This usual means a residential charge over your home or a second property perhaps you own.  They need to have more free value that the  loan as a rough example if you needed to borrow £65,000 you may be required to £100,000 in free assets.

Unsecured Lending

– This occurs usually when the amounts being borrowed are under £25,000 or in some rare cases the business is strong enough in cash and assets to be able to easily pay the loan back.
Unsecured lending in our opinion is a little bit of a non truth as you will most likely be required to sign a Personal Guarantee or someone else will. This guarantee requires that in the event of the worst happening to the business. You will personally agree to pay the loan back from any means you have.  It depends on the lender how hard they force this,  however if driven hard to the ladder of the law, then you could be made bankrupt by not paying what is owed.

We make it priority to explain the risks  of PGs to clients as most of the time they do not really understand this

Summary

The first step to get a business loan is to understand the elements of security that a lender will expect and be prepared to accept the risks of signing these agreements. Business projections, market conditions and strategies play a large part in proving that the borrowing is safe. Northwest Business Funding specialise in offering financial modelling to make sure you understand the future trading of your business as.

In the next edition of how to guarantee to get a business loan, we will be looking at the legal side of security and what that means as well as looking at Affordability.