Passport, Driving License, Utility Bill. Lender need to know and verify who they are dealing with (money laundering checks)
Unless you or your business is in the enviable position of being cash rich, you will inevitably need to raise finance to purchase new equipment and expand. It is the same for all businesses and even countries (although generally Countries don’t approach Asset Finance Lenders).
Business borrowing is generally for two purposes; cashflow and equipment acquisition. The most common forms of borrowings are:
- Bank Loan
- Finance Lease
- Hire Purchase
- Commercial Loans
Below is an explanation of the types of asset finance available their pros and cons, although the article does briefly touch on other forms of borrowing.
This process can to some seem long winded but a good broker will able to help you through the process. Not all the elements list below will be required for every application and in the case of new start business will not be available. However, if you think about it logically the information you provide is all the Lender has to judge you or your business with, to then decide whether they think that you are a good or bad risk. You will be confident in your business ability to flourish and prosper but if you don’t give information (some of which will be in your head) to the lender you may get a rejection.
So what’s needed?
The company’s most recent accounts and management accounts if the annual accounts are over 6 months old.
Three months’ recent statements – lenders are not specifically looking at the bank balance they are interested in how you operate the bank account. A clean bank account with no overdraft breeches or returned cheque’s demonstrates a business under control.
This is the thing that most people get stressed about and can come in all formats from a single page to “War and Peace”. The important thing about business plans is to communicate to the lender your vision and why borrowing their money will help your business grow. It should show that you have considered the key elements of the project; competition, costs, overheads and the most important how sales will be delivered.
A basic financial model showing income and expenditure. The main purpose of the projection is to show that you have thought about the project and to prove affordability. Lenders obviously want to see that you will be making a good profit and so can pay them back the money you want to borrow.
These can be varied from CV’s for directors to business tenancy agreements and will vary dramatically between different assets and businesses.
Always remember – the more comfortable you can make the lender feel about your business – the more likely you are to borrow successfully at a lower rate