What do you need to get a loan? The 3 criteria for Business Finance
Posted by: electime 29th November 2019
Nearly every business can benefit from finance. Whether you’re making a property purchase, acquiring specialised equipment, or just in need of cashflow, business loans can be used for a wide variety of purposes. With interest rates lower than they’ve been for a while, now is a great time to be looking for finance, too. But finance can be a confusing process at the best of times; one of the most common questions we get at ASC is this – “What do I actually need to get a loan?”. Now, that’s a question with no exact answer. However, over the years we’ve found that lenders are looking for 3 particular things, all of which have relevance to any electrical contractor looking for finance. So, what do you want to be thinking about when looking for a loan?
1. Cash
Lenders want to minimise the risk to themselves as much as possible, and one of the key ways to do that is through making sure that you’ve also got money “in the pot”. Lenders will expect you to have cash available equal to roughly 25-33% of what you’re asking for as finance. This is a standard requirement for any business, no matter the sector or area – you’ll always need money to hand.
2. Collateral
The other major way lenders minimise their risk taken on loans is through the offering of security. When you’re looking for a loan, being able to offer some form of valuable collateral against the finance is considered the ideal situation for a lender. Normally, this takes the form of property – it’s worth a lot of money, you’re going to want to keep ahold of it if possible, and it’s not exactly going to go anywhere, is it? If you’ve got the ability to offer security, lenders will likely look on your application more favourably.
Collateral, admittedly, is an area where electricians and contractors can run into issues. Unlike a restaurant, for example, you don’t need a physical premises to run your business. You go to clients; they don’t come to you – what purpose would property serve? However, that doesn’t mean you’re out of luck – there are multiple viable options available for unsecured finance.
3. Capability & Character
It’s one thing to be able to offer cash and security. It’s another to be able to run an effective, profitable business. Lenders want to be sure that you have both the skillset and commitment needed to use the finance they offer wisely before they’ll open their wallets.
In this area, electricians are well-set for success. Working with electrics is a skilled trade, which requires qualifications and training. In fact, you need to pass exams to even call yourself an electrician! This means it’s not something you can do “on a whim”, either – if you’ve got those qualifications, you’ve committed to being an electrical contractor as your trade, which lenders both recognise and appreciate.
As we mentioned, the requirements for loans will be different for every business. But by making sure you have these points covered, you’ll greatly increase your chances of success.
ASC Finance for Businessare specialist commercial finance brokers with 50 years of success in the industry. With 20 regional offices across the UK, ASC provide SMEs nationwide with a faster, simpler, better approach to business finance.
