Using secured finance as a way to grow your business is actually one of the best things an entrepreneur can do, and it is especially useful for SMEs and start-ups.
Historically, it was always the banks that had the final say on whether a business could flourish and often, SMEs plateaued because they were never given the opportunity to reach their full potential.
External finance is an amazing way for businesses to meet their goals, grow or turnaround their business, but due to the fact that “borrowing” in any capacity is still deemed taboo, there are still thousands of businesses out there who struggle on, rather than reaching out for help.
A study three years ago found that nearly half of UK businesses put themselves in the ‘permanent non-borrowers’ category and sadly, only one third of UK SMEs access any form of external finance. This means that far too many businesses are holding themselves back purely because they do not want to use borrowed money to drive their growth.
Understanding the lifecycle of a business can actually result in the difference between a business thriving and a business struggling to stay afloat. Being aware of the different stages a business encounters will mean that you can access the right sort of assistance, at the right time.
At What Stage Should Your Business Access Funding?
Getting to grips with the current challenges your business is facing by doing a proper assessment could end up being the best decision you make – well, aside from actually accessing financial aid, that is.
Businesses at the initial stage, such as start-ups, will likely have very different needs to one that has reached the expansion part of the cycle.
For example, SMEs at the very-early stage in their journey will need to find seed funding to help meet the first goalposts ahead of them. This may come in the form of angel investors who see something in the product or service that is being offered, or funding can be found through crowdfunding.
But an established business that wants to push for growth will find themselves in a very different situation. A business venture at this stage will have proven that there is demand for what they offer but may find themselves in need of financial assistance to achieve their expansion plans and get to the next level.
Challenges SMEs Experience That Funding Could Help AlleviateCommon challenges that are experienced when businesses are at the growth stage of their cycle are the following:
- Having a business model that works fantastically but being ‘stuck’ because of the inability to use more revenue for growth plans.
- Keeping too many plates spinning at once. Often, when businesses are doing well, they start to expand in other areas to keep up with demand. That can include the recruitment of more staff or designing and launching new products to increase the marketshare your business has within its industry.
- Your business has encountered some serious competition and in order to even out the playing field, there is a need for rapid growth that you currently do not have the working capital for.
- Being a start-up that has a phenomenal business concept, but one that cannot function close to what it could do, all due to the fact that the funds are not readily available.
So, How Can the Property You Own Help in Growing Your Business?
Sadly, funding for start-ups has been readily available. In the UK an entrepreneurial spirit is fostered but is also stilted by lack of funding. Often, the majority of start-ups do not fit the standard lending criteria and because they are unable to provide a long-standing proven track record, it has always been hard for start-ups to get access to loan products.
The lending criteria often dictates that companies provide a record of all accounts, a cash flow forecast and to demonstrate a proven business model. Of course, start-ups are not able to meet this criteria, set out by the majority of lenders, which means that progress is slow, they fail to get off the ground at all or they can not grow enough to be successful.
There is a way around it. Secured finance means that some lenders are more confident with the idea of lending to start-ups.
Whilst of course, ideally your business may have access to an unsecured loan, sometimes that is not an option for start-ups or some less conventional businesses. However, that does not mean that you are left with no options at all.
Secured business property finance enables businesses to grow by allowing borrowing that is leveraged against property.
Equally, a secured business loan can actually work in your favour! Sometimes, a secure loan leaves extra room for negotiation. Many business owners have found that they are able to negotiate a cheaper price if they are willing to secure a loan against assets, so that the lender feels more confident in lending.
Lenders dealing with business property finance will always do their due diligence before lending to businesses. Upon the assessment and examination of a business, a lender will then decide if they can lend to a business and if so, how much. This will also be dependant on the independent valuation of your property and the LTV (loan to value that the lender is prepared to accommodate).
There are many reasons why a secured loan can actually be advantageous.
With a secured loan, the interest rates can be lower and the maximum funding available is usually higher, with cheaper rates and longer term lengths. All that lenders require is some sort of collateral and this is why it is often referred to as asset-based lending. Offering up collateral, such as property or stock, is one way in which start-ups can get the funding they require to support their growth plans.
Nucleus Commercial Finance are excited to announce the arrival of a new product and that will help start-ups flourish into the businesses they can and should be. For more information, check out our Start-Up Finance loan – perfect for new businesses wanting a secured, interest only business loan. Borrow from £25k to £20m, over a period of upto 5 years, interest only.