Top tips for securing finance for new businesses

With many thousands of small businesses and start-ups operating in the UK, there is undoubtedly a demand for funding amongst those with big ambitions to scale, and those just looking to get their idea off the ground.

However, the reality of the matter is that securing finance can be challenging and many businesses are left wondering what they can do to improve their chances of getting the backing they need.

Lenders want security for loans

Commercial lenders want to know their money will be secure when they lend to a new business.

They also want to be sure that the borrower can repay, or are in a position to have their assets liquidated should they default.

Securing financing for a start-up is especially challenging, as it is inherently riskier than financing an existing business.

There are many ways of raising finance, including alternative methods outside of traditional loans such as angel investors, peer-to-peer platforms, crowdfunding or credit unions.

How can businesses improve their chances?

There are certain steps you can take to improve your chances of being accepted for financial backing:

• Have a strong, concise and clear business plan. Show the potential lender you have done your research, know your market and have the expertise and systems in place to execute your plan effectively.
• Improve your credit rating. Run your personal and commercial credit score before applying for a loan. If it is low, spend some time working to improve it.
• Be sure you’ve found the right type of finance, and be realistic. Make sure the funding you’ve identified is suited to your needs, and that you are only trying to borrow as much as you need.
• Understand the lenders requirement for collateral, and prepare for due diligence. Some lenders may ask for a guarantee before lending to you, such as business premises, or assets such as plant and machinery. In some instances, lenders make ask you to put personal assets forward. Deals aren’t guaranteed until the lender is completely satisfied with the conditions of lending.
• Be able to demonstrate positive financial health. Although not essential, it is highly recommended that you produce comprehensive management accounts in the months prior to seeking finance.

Before trying to secure finance, it’s a smart move to discuss your plans with your accountant as we’ll be able to assess whether you’re in a good position to make an application.

What if my application for finance is rejected?

It’s always useful to try and ascertain as much information as possible in respect of a rejected application, so that you can make adjustments next time. That being said, you should be wary of making too many applications as this can also impact upon your credit score.

How can George Hay help?

Possibly one of the most important steps you can take is to seek advice from an expert. We can help you to find the best deal and assist you with preparing the information that lenders and investors need, including detailed and bespoke management accounts – brokering the best outcomes for you and your business.

To talk to us about how our professionals in Cambridgeshire, Bedfordshire and Hertfordshire could support you, contact us today.