July 2014

Getting funding from the banks

Getting funding from the banks is one way of funding and growing your business. Banks, like all other for-profit companies, are in the business of making money. So the main thing they look for in any company that approaches them for funding, be it a craft shop or a jet engine manufacturer, is whether that company would be able to repay its loans in full. How can you prove to a bank that you’re not going to just run away with the money or default the day after you’ve received the loan? To start with, you need to prove to the bank that your business acumen isn’t circumscribed to choosing which craft items to buy or produce; you need to have a clear idea of where the business is going, including how much money you need and precisely what you need it for. This will usually involve producing a business plan. At their best, business plans tell an engaging story about your business – whether you just have a lifestyle or you want to take over the world. Most funders will also credit score you, so make sure you have an up to date set of accounts and a trading history.

Another often ignored way of getting a bank loan… is not going to a bank. Think of it this way – banks are constantly inundated with business applications. Naturally it is very time-consuming to sift through all of them in order to find the reliable, credit-worthy companies. What’s more, they’re less willing to take the risk. So what many banks do is, instead, rely upon brokers and corporate financiers to contact the relevant bank managers on your behalf. A bank loan application that comes via a broker is far likelier to success purely because brokers only progress the applications that they are confident about, which means banks are far likelier to engage with the company and, eventually, lend money to them.

But bank debt isn’t the only option open to craft store owners looking for finance to re-kit their stores. I’ll mention three more: asset-finance, stock-finance and shopfront renewal grants. Asset finance is a form of debt that sees the lender effectively buy the asset (e.g. machinery, cars) and then lease it back to the user. So if a craft shop possessed any machinery or electronical equipment (e.g. a diamond cutter, pottery machines, or even something like a printer or a point-of-sales system) it would be possible for a lender to buy that piece of equipment but for the shop owner to use it as if it were theirs. If your business requires the purchase of stock (usually from abroad), a stock finance facility is another interesting form of finance. It’s usually quicker to access stock or asset finance, usually requiring less risk that getting a bank loan.

Finally, even if you have decided you wish to pursue the bank route to the detriment of all other routes, don’t forget about grants. Nothing tastes sweeter than a bit of free cash with hardly any strings attached! You may be surprised to hear that many local authorities offer small business grants to help shops renew their shop fronts. It’s win-win – local authorities get a nicer-looking high-street, and businesses get to make their shopfront, which is effectively their way of enticing in any casual passers-by, that bit snazzier and more appealing.

At businessfunding.co.uk we have a network of experienced fund raisers and advisers that can help your business seek funding, whether that be through a bank loan, stock finance, or asset finance.