Struggling to find a loan for your small business? You’re not alone.
In fact, you are likely one of thousands of company owners turned away by the banks each year. It’s estimated the total annual amount of refused loans is somewhere around £4bn.
And with banks ever more cautious there’s no sign of the loan application process getting any easier. But this might just be a blessing in disguise for your business. From start to finish the entire loans process is unsuited to the modern business that needs a quick and simple answer to their cash flow problems.
An Unnecessary Process
The process of applying for and being approved for a business loan can be incredibly time-consuming. Before a bank will even consider your application they will want to see a range of documents including:
Most lenders will ask for at least two years worth.
Historical data representing your working capital.
Profit and losses statements
Again, usually about two years worth.
Outlining goals for profit, growth, sales.
Both for your business and your personal documents.
And/or a SBSS (Small Business Scoring Service).
A debt schedule
Clearly stating any current debt your company has.
Cash flow forecast
To cover the length of any potential loan.
Showing how effectively your company uses customer credit.
With payment information on all employees for the past 6 months.
Permits and approvals
Will depend upon the industry your company operates in.
Proof you’re entitled to the property for length of the lease.
You will also be expected to provide information regarding the personal history of your company and the kind of entity your company is, as well as a detailed plan of what you are going to do with the money you are borrowing. An application needs to convince the lender there is almost zero chance of failure, something that for new and evolving businesses can be extremely difficult to do.
Even once approval has been granted, many loans come with conditions imposed by the bank. This could mean keeping your company’s debt to equity ratio in balance or possibly limiting how much of the loan can be used for individual payments. It is also common to find a loan application approved but for less than the full amount. This can put any business in a difficult position, with a sizeable loan that will not cover the expenses it was intended for.
The Issue of Collateral
Unfortunately for business owners, few banks today will offer loans without the insurance of collateral. The size of loans needed by companies to expand means that often the only thing sufficient will be a personal asset, usually a home or car. Any defaults or late payment will give the bank right to repossess these items, with potentially devastating consequences for the person whose name is on the contract.
A Negative Approach to Business
One of the main reasons that loans ultimately fail to solve problems with cash flow is that with so much at stake, they encourage an overly cautious approach to business, with staff and owners forced to prepare for the worst. Fear of missing monthly repayments or being caught out by a variable rate of interest can make companies reluctant to invest in new staff or equipment, that could be vital to long term ambitions. This can be particularly problematic for firms with a large client base, who may feel they need to factor late or even missed payments into their projections, in order to ensure there is always enough money to make repayments.
How Jardine Norton can Help
For those who can’t face the delays, hurdles and red tape associated with applying for a business loan, there is a faster way to solve your company’s cash-flow problems: trade finance, which is the field in which we in Jardine Norton specialise.
Our application process is simple and efficient, with over 90% of applications approved and funding provided within 24 hours. Funding decisions are not based on securing onerous personal guarantees, the past performance of your company or its credit rating; our decisions are based on the specific invoice or contract that you wish to fund and your customer’s ability to pay.
We ask one simple question: Can your customer pay? If the answer is yes you’ll get your money straight away
Unlike other types of borrowing, we won’t ask you to sign a long-term contract and there’s no need for collateral to act as security. It’s risk free and completely flexible in order to suit your business.