Historically, companies have turned to their local bank manager to secure funding for their business. According to the British Business Bank 2017 Business Finance survey, 37% of SMEs approached their main bank as the first port of call when they realised they needed funding.
This was not always successful. Many will have been declined a loan from their bank through lack of security or length of trading time etc. What wasn’t always clear to those businesses, however, was that there are alternative unsecured business loans that they could turn to.
The likes of providers such as Funding Circle, however, are gradually changing businesses’ perceptions of options available to them through their increasing profile and aggressive direct marketing.
Mortgage advisers also have an important part to play in increasing awareness. Every mortgage adviser – even if they are mainly a residential adviser – will have a large proportion of their database who run and own their own business.
Last week, we ran a business loans workshop at Connect’s offices for our appointed representatives. The event was extremely popular and oversubscribed with advisers wanting to learn more about this market.
Attending events such as this can help advisers understand where and who to turn to if they have a client with a business which needs funding and also what the funding can be used for and how it works. For example, they may be able to assist a client to raise £300,000 for the expansion of a business to take on new premises and staff etc with a loan that can be spread over a term that is manageable for the business. Unlike the traditional loans that mortgage advisers are used to, property is not used as security for the loan. Instead, lending is based on the business’s turnover and a PG from the director or shareholder of the business, making it a much more flexible funding option.
We are often approached by start-up businesses which need some seed money to get a new business underway. Without existing accounts or security, if they are refused funding from their local bank, the business may not get off the ground. Its worth noting, however, that there is a government funded start-up loan option that can assist with unsecured business loans of up to £25,000. The interest rate is 6% with no fees, and businesses can take a loan term of up to five years. More details can be found at www.startuploans.co.uk.
By taking some time to build their knowledge in this market, advisers can expand the ways they can help their clients and benefit from additional rewards and loyalty rather than losing clients directly to a lender or another competitor.
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