Getting a loan the easy way
Sep 09 2009
‘Yes you can have a bank loan, but you’ll need to put down a pound of flesh as security first,’ seems to be the current attitude towards SMEs looking for finance. But there is still a way to obtain this sort of funding without getting torn to pieces.
For start-ups, there are some government grants available through your local council, and if you’re an established business with a long trading history you might become one of the chosen few to receive a loan backed by the government’s Enterprise Finance Guarantee (EFG). But what about all those SMEs in between?
In these circumstances the usual advice seems to be to ask friends and family or go to a business angel. But while these options can prove valuable alternatives, many simply don’t have easy access to this sort of cash and aren’t prepared to give up a portion of their business in return for it.
Cue one of the best kept secrets in the small business world – the Community Development Finance Initiatives (CDFI). There are more than 60 of these organisations in the country which provide loans and support to businesses and individuals.
Nicholas Nicolaou, managing director of GLE oneLondon, a CDFI, says the initiatives are designed to help viable businesses in need of funding. And there’s certainly no shortage of SMEs in this position, with the latest figures showing a plunge in bank lending of £8.4 billion in July.
The sorts of loans accessible will vary depending on the region and CDFI. So you will need to go to the Community Development Finance Association website to view what’s available where you are. In London, for example, there are various loans for small businesses, such as through the Mayor’s Economic Recovery Loan Fund, which provides sums of between £10,000 and £50,000. Although the fund by no means offers free money (rates are 7.85 per cent, with an additional one per cent arrangement fee) Nicolaou says that the interest is still below the market average for unsecured loans.
The other major advantages of using money available through the CDFIs is that they don’t take into account credit history, will look at applications on a case by case basis and tend to cover all sizes of business (from the sole trader looking to boost cash flow to a multimillion pound concern set on expansion). In other words, they take some of the bite out of borrowing.
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Comment by frank golden
Monday 14th September 2009Great article, just a thought on this topic; I approached a bank 3 years ago for a loan to start my own printing company called Print Hut based in St. Neots, Cambridgeshire. The idea was to purchase wholesale printing whilst operating from an ultra low cost centre named the Print Hut. The bank wanted to see small business plan and a risk from me that would be comparaible to theirs. In the end I decided that the time required to publish a business plan could be more effectively spent on networking and sales. Incidently 2 years later I now have a £10,000 overdraft facility which I have yet to go into. By the way the bank in question, HSBC approached me!!!! Fank Golden Print Hut The Uk's only Ultra Wholesale Print Company 01480 216 331 www.printhut.co.uk Frank@printhut.co.uk
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Comment by Gary Burgess
Tuesday 3rd November 2009Great article, great comment. But some of us arent that lucky. My business getyertackleout.com We sell fishing tackle online retail. The business is growing at alarming rate, but cash flow is the only thing that is holding it back. Get yer tackle out is widely advertised and has a step by step business plan. But at the moment I cant seem to get the bank to realise its full potential, especially in this growth market. I have suppliers all over the world just waiting to trade us, but just cannot seem to raise the right amount capital needed. I'm prepared to give my pound of flesh and a little bit more if needed. But I just need someone to able to take my business seriously and realise its full potential.
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