Obtaining a bank loan or overdraft is more difficult than ever before, particularly for relatively small businesses. Quite understandably, the banks require security for any loan and normally the security they are looking for will be in a property asset. However, property values are falling or are stagnant and thus banks are reluctant to make a loan which represents a high proportion of the value of property.
Viable businesses looking to grow need funds for increased working capital (debtors, stock etc), equipment and staff. Unless that funding is made available, the business will be stifled and, at best just tick along. Opportunities which growth will bring to the company, its staff and the wider economy will be lost.
I have read that in the three months to November 2012, total bank lending REDUCED by £4billion, this is despite the government’s £80Billion Funding for Lending scheme (FLS). I have also read that the Council for Mortgage Lenders said mortgage lending increased by £2billion in 2012 and expect this to rise by a further £13billion in 2013. Doesn’t this suggest that the FLS scheme is being used to support property lending when what is needed is lending to business?
Perhaps not enough use is being made by businesses of the Enterprise Finance Guarantee Scheme (EFG). Through this scheme the government guarantee up to 75% of the loan (between £25k and £1m) in return for a 2% premium. With interest rates being at an historic low, this premium is not an issue for any viable business looking to expand.
Before any bank will agree to a sizeable commercial loan they will require up to date trading figures and forecasts. They may require a detailed business plan. This is an area where many small businesses are not as strong as they need to be. It is vital that a persuasive and well documented case is made to the bank. This is certainly an area where a good firm of accountants can get involved, help produce the figures and introduce the business to a bank manager prepared to listen sympathetically to the plan.
Having said that access to credit is difficult, credit is still available. As well as the EFG scheme there are specialist lenders, invoice discounting may be an option and crowd funding has become available (eg Funding Circle ). There are often options which business owners have not considered. We are aware of all types of commercial lending options and we look to help our clients find the best finance for their own particular circumstances.