Getting a business loan, especially for a small start-up can be daunting. We can help ease your load.
There are numerous potential “lenders” and just as numerous options on offer.
There may appear to be many choices and different types of loans, credit facilities, overdrafts, small business loans, invoice factoring and so on. But in practice, this is a minefield for the small business needing capital but, usually, unable to offer security.
So it’s important to choose the business loan that is right for your business.
Overdrafts are meant to be flexible and not require the same onerous requirements of security of a loan. But , they need to be renegotiated and rearranged regularly, (say, every six to twelve months) and can be called in at any time, often with little notice or, even, no notice at all, and exceeding its terms and/or limits are expensive. Overdrafts are really designed for day-to-day expenditure running the business; they are not suitable for capital expenditure, major exercises or for start-up costs for any length of time.
Banks tend to shy away from offering overdrafts to small businesses. Primarily, the reason is that a business capitalised through overdrafts will be the first likely to fail in an economic downturn – something that tends to be cyclical .It’s a fact of life that during such downturns banks are likely to curtail or even call in overdrafts, thus starving small businesses of working capital and consequently leading to business failure. In a downturn cash is king – no overdraft, no cash, no trade.
In any event, in the modern business world banks tend to lend more on ability to repay than on the security offered by the business.
For purchases of equipment or other capital assets a better route is a small business loan. The loan can be tied to the lifetime of the asset being purchased, with the regular payments reducing the loan amount gradually during the period.
Unlike an overdraft, the bank will have to keep to the negotiated period of the loan agreement (unless the loan conditions are breached) so the funds made available are guaranteed for the loan period. The bank will also see that its loan is reduced periodically as per the agreed instalments, preferring the regular payments received from the loan.
Floating or fixed interest rates, different terms and conditions, different currencies, debt finance such as factoring or leasing , Enterprise Finance Guarantee scheme ,the bank’s requirements , invoice factoring or accounts receivable factoring ( to speed up collection, at a cost, of otherwise slow paying invoices).
With so many difficulties, multiple choices and multiple decisions – it’s something best done with our knowledgeable assistance.