Can I get finance? And if so, how do I go about getting funding?
This is a common question. Essentially, in order to decide whether or not to give you funding, lenders typically look at three key areas of information, known as ‘pillars’.
These are:
- the business itself
- the people
- The asset
Let’s look at these in turn:
1: THE BUSINESS
Funders will want to know several things:
How long the business has been trading, what reputation it has in the marketplace and how financially sound it is. To demonstrate evidence in this, you want to be able to show historic strength with up-to-date accounts and bank statements.
2: THE PEOPLE
Specifically, the business owners and directors:
Who are you? If you are not the founder, how long have you been involved in the business? What background do you have in the industry? What reputation do you have among your peers? With the rise in the use of online reviews and Linkedin profiles by prospects, funders and recruiters alike, it is easier now than ever before to establish trust in you as an individual.
A new-start business, one with no financials to back it up, can still secure finance if the owners have a great reputation and a decent net worth.
3: THE ASSET
An asset is a tangible item that has a real value:
Assets typically fall into two camps:
- Standard assets, which are typically items that have wheels and engines, and
- Non-standard assets, such as solar panels, office fit-outs, catering equipment etc.
Get in touch if you’re not sure which camp your asset falls into.
The panel of funders will have a preference for assets and every funder will be different. For example, a lender who will provide funding of a supercar might not fund a shipping container.
A strong standard asset – let’s say a motorhome – doesn’t lose value and has a strong residual and resale value. This is reasonably straightforward to fund as the residual value matters to the funder, should something go wrong.
Owners of very profitable and established businesses will typically find it easier to gain funding of soft assets.
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The panel of funders being approached with your proposal will have various appetites, according to which pillar matters to them. Your broker’s job is to approach the right ones who best fit your particular situation and funding request.
A broker’s close relationship with a funder will allow for a higher percentage of funding deals approved, with better pricing and more flexibility on the deal’s structure for you as the applicant.
Want to give yourself the best chance of securing the finance you’re after?
Make sure that you’re strong in at least one, preferably two of the pillars.
Even better if it’s all three!