Six factors to consider before applying for a commercial loan

Businesses are diversifying their funding options ten years after the global financial crisis.

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Increasingly they are turning to specialist providers who can access asset finance, peer-to-peer loans and venture capital or private equity investors.

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Finance

A recent report suggested that traditional bank lending to small businesses flattened last year whilst peer-to-peer aid increased dramatically and asset finance also grew by 12%.

In an increasingly febrile political and economic environment due to Brexit negotiations, companies are looking to secure their futures. When looking for a barometer of this Northern Ireland is a good point of reference. For commercial loans Northern Ireland is a region serviced by sites such as Commercial Loans Northern Ireland through Asset Finance.

Factors

In any event, there are key factors to reflect on when seeking a loan.

1. Presenting your accurate financial position is a starting point. Accurate reports will make a lender or investor more comfortable and will also reflect why you need the capital.

2. Make sure you have an up-to-date commercial credit rating. This will show the company’s ability to pay back any loan and should reflect the profit and loss data and balance sheet you are presenting.

3. Give access to an accurate picture of how your company works. Explaining your management structure and how it interacts will be essential if you are to illustrate how the new capital will be used to enhance the firm’s future performance.

4. Ensure that you have correctly calculated the size of the investment you need. This may be a one-off opportunity, and you will not be able to go back in six months’ time and ask for more cash. On the other hand, you need to utilise the investment effectively and avoid the issue of dead cash within your organisation. The latter has a negative impact on your company’s performance.

5. Check the options. A reliable asset finance company will offer many alternatives. Develop your relationship with the one you choose by regular personal contact.

6. Make sure you are open and honest in your negotiations. It will not benefit either party if an accurate assessment of investment needs, and how they will be implemented, is not discussed at the onset of negotiations.

Research the market and ensure your loan fits your company needs and the investor’s requirements.