This is a very good question.
In the past, if a business wanted to borrow money, they would visit their local Bank Manager. The Manager would know the business and sit down with the owner and discuss what funding was required. Today, your traditional High Street Bank has far fewer branches. According to Which?, in a recent report they stated that 3,303 branches closed their doors in the period from January 2015 to August 2019. It can also be difficult to get to the Relationship Manager responsible for your business (assuming you even have one) and it is not uncommon for these Relationship Mangers to change all too frequently in the eyes of the customer. Furthermore, lending criteria has become more stringent in general on the High Street and there has been an influx of new Challenger Banks, Alternative Funding Providers & Specialist Lenders, some of whom have no branch presence. So how do you know where to start? This is where a Commercial Finance Broker can step in.
Expertise
A Commercial & Asset Finance Broker such as Lochend Finance has years of experience in Banking & Financial Services. They are experts in finding the right financial solution for your business. They operate every hour of every day in the financial services market place. As a business owner, you are an expert in running your business. Business owners, in all probability, will not have the up to date knowledge in terms of product availability, rates etc. Will they know which lenders have an appetite to lend to their sector and for the purpose they wish to borrow funds? Who can lend the money in the required timeframe? Do Business Owners have the time to search the market for the best service, rates, terms & conditions? Your Commercial & Asset Finance Specialist will do that for you. As a trusted advisor, they will search the market place and bring you the best solutions from well over 250 lenders.
Does using a broker guarantee I will get my loan?
The short answer is no. Success or otherwise will depend in the merits of your proposition. However, your chances of securing the funds you need may well be significantly improved by using the experience of your Commercial & Asset Finance Broker.
What factors do lenders consider?
There are too many to list and some may be somewhat confidential to the specific lender. However, here are a few points to consider:-
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- Lenders will expect borrowers to demonstrate how they plan to repay the loan. Will this be cash / profit generated from trading? In Property Development, it might be the sale of a property on completion. Are you borrowing to rent commercial or residential property? If so, does the rental income more than cover the loan repayments with a suitable buffer
- Credit history. The cleaner the credit history of the Business / Directors, typically the wider the choice of lenders that are likely to be available
- Loan purpose – it has to be legal for one! What are you going to do with the funds?
- Sector – most lenders willingness to lend will be influence by sector. For example, it can be more difficult to obtain borrowing if you operate in a sector that relies heavily on discretionary spending e.g. restaurants, hotels, retail. Some lenders have little or no appetite for property development or investment. The opposite can be said about others.
- Risk – how much is the business contributing? Lenders do tend to like it if the owner has “skin in the game”. Is the underlying proposition simply higher risk? Is security available? Personal guarantees? All of these can influence a decision
How will I know I am getting a good deal?
At Lochend Finance we have a duty of care to Treat Customers Fairly (TCF). It is incumbent on us to ensure we bring you the most appropriate offer/s and to present & explain these to you in terms of not only the rates on offer but any attached terms and conditions that may apply to the loan either before or after it is granted. Some lenders only deal via brokers and through our knowledge & experience we look to ensure we secure the best offer possible in terms of price. We are also regulated by the Financial Conduct Authority (FCA) and need to be approved to carry out our day to day activities. Keep in mind it is not always about price. One lender may be charging lower rates or fees but the conditions attached to the loan may be too onerous for the business.
Summary
So why use a Commercial & Asset Finance Broker?
- Time – the simplest of loans will still take hours to source & secure. Larger more complex deals will take days & weeks. Using a broker allows you to continue running your business whilst the broker does the leg work for you
- Professionalism, Trust & Expertise – brokers are financial experts. They know the financial marketplace. They should be FCA regulated and can be trusted to act in your best interests. Check that your broker is registered on the FCA’s web site and if not, why? You would also expect them to be a member of their trade association, such as the NACFB. You should find details of this on the brokers website / business card.
- Price – Your brokers will ensure you get the best rates possible based on your background & circumstances and can access deals & offers not publicly available
Please feel free to contact Lochend Finance today at info@lochendfinance.co.uk or fill out the contact form at www.lochendfinance.co.uk
