smallbusiness.co.uk: Helping your business think big

High street banks generally tend towards risk-averse lending and restrict themselves to a narrow selection of products that have become commoditised.

This means that in a growing number of cases the banks are either unprepared to extend financial support or their offer is one that meets the banks needs rather than the client's needs - you can end up spending a lot of time to no avail.

‘If you can’t get funding from your bank,’ says Mark Endersby of finance broker Funding Solutions, ‘the first thing to realise is that there is an entire raft of independent specialised lenders sitting right there behind the high street waiting to do business with you.’

He explains that, because they’re prepared to specialise, they can take a much more experienced view of your assets, and therefore analyse the risk in a much more positive way. This can allow them to lend more money against an asset and lend at a cheaper rate.

The challenge is in knowing who these specialised lenders are, where they are and how best to approach them to get what you want most easily.

Using a business finance broker

Typically, the better informed your decision when it comes to funding, the better the deal you will get. As with all buying, it’s important to analyse and compare a range of options and suppliers.

Business finance brokers are well placed to provide independent, impartial advice to business owners, and typically their advice is free. They advise both on the most suitable financial product and the most suitable lender to meet a business owner's needs. The same product from different lenders can be a very different proposition.

Importantly, a reputable broker should be able to walk through any hidden costs or contract clauses that could result in unexpected charges being incurred. Headline rates are there to attract attention and are not necessarily an indication of the cheapest facility.

Important considerations

Whether using the traditional high street banks or specialised independent lenders, there are considerations any business should keep in mind.

Endersby suggests that business owners looking to expand their business should consider the following:

- Use the assets you are looking to acquire to help secure the finance.
- Use a suitable timescale for the funding. Do not use long-term finance to fund short-term assets and vice versa.
- Will you look to repay any facility early? If so, you should structure in a manner that will avoid redemption penalties.
- Do not be fooled by headline rates! Consider the total costs involved.
- Be entrepreneurial. There is a cost to borrowing money, but if this allows you to make more money then it could be a worthwhile expense.

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