Q: How can I find additional funding from a bank after taking out a secured loan to start a family business in the South West?
Jul 27 2010
Answered by: Clive Lewis Ask a question
Banks use a variety of information to assess the risk associated with business finance facilities. For smaller businesses, a key input to most lending decisions is behavioural scoring data (how accounts are run and loans repaid). Basically, the following are bad:
– Unauthorised overdrafts
– Missed payments
– Dramatically falling turnover
– Paying suppliers late
– Court judgments
– Late filing of accounts at Companies House.
The key is to provide your banks with timely and accurate information to enable them to assess your current position and to see with clarity what your likely funding requirements will be.
Banks don’t like surprises; if you’ve got a bad credit history they will find out about it. You must provide the bank with sufficient information to show that you have a grip on the finances.
You mention a secured loan. Your performance in keeping up with payments on that will be something the bank will take into account when deciding whether you are a good risk. If you feel you have a reasonable credit history it would be worth talking to a bank about your financing needs and finding out what their reaction is.
Transferring – not to be undertaken lightly….
Switching banks is more a consideration if you have a new need for finance or have been rejected by your current bank – although you should always discuss rejection at a higher level in your current bank. Some banks have a confidential hotline that you can use to make an initial approach to alternative sources of finance.
If you are considering a new source of finance, it helps to be open to suggestions of alternative types. Businesses like overdrafts because of the flexibility, but invoice finance can give an increased facility.
Banks now view overdrafts less favourably.
Sources of information and advice:
The Business Link website has information regarding accessing finance and grants. For more information,click here
Also on the same website you can find information about you local Business Link office where you can access a meeting with an adviser.
The National Federation of Enterprise Agencies (NFEA) also offers advice to start-up and early stage businesses. For more information, click here
Finally you may need a business plan with trading and cash flow forecasts to secure further finance. If you are unable to put a business plan together or might want some help with the financial information you should speak to your accountant. There will be a charge for this help so it would be wise to find out how much before you get an accountant involved. For more information about finding an accountant, click here
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