At what point do you look for something better than a basic business account and does it facilitate extra borrowing?

[John_V85]

We currently have a basic business account with Santander, but we run much of our e-commerce business through online banks/wallets such as WISE to benefit from far better FX as much of our income and expenses are not in GBP.

We also have borrowings with the "high street" alternative lenders (think Funding Circle, Lending Crowd, etc.), but are more or less capped out at what any of those lend. Santander doesn't provide loans of any note to those with business accounts as far as I can tell.

I'm a bit unsure at this stage as to how to best fund our future growth, and wondering if I should be positioning ourselves in a way that would help with this. Equity and reinvestment are options (and will be used), but I would like to increase our absolute borrowing as well, rather than deleverage indefinitely.

So my early stage thinking is, should we be looking to obtain a corporate account, and maybe even pushing more activity through it even if the FX isn't as good? As far as I can tell, these typically seem to introduce fees for things which to date our free, but I wonder if it provides possible access to financing that just isn't possible with a basic business account.

I'd be interested to hear any thoughts. Thanks in advance.

 

[NickGrogan]

Are you profitable?

If you've got decent turnover but you're reached your borrowing limits, then more borrowing probably isn't the answer

 

[John_V85]

Are you profitable?

If you've got decent turnover but you're reached your borrowing limits, then more borrowing probably isn't the answer

We are profitable, and our profitability has improved since borrowing around the limit of what the alternative high street lenders I referred to lend, which seems to cap out at around 500k.

So, I am trying to consider how to position ourselves to be in the best position to raise larger amounts at reasonable rates to maintain similar and appropriate leverage ratios as, all being well, we grow.

 

[Porky]

@John_V85

IMO Banks are unlikely to offer you anything more than you already have from the likes of funding circle they are like umbrellas in the sunshine frankly. The difference between each provider is minimal. Moving from Santander will bring little advantage IMO. But that doesn't stop you talking to a few on the basis that you will move over if they support with a debt requirement of X to facilitate your growth.

If you are at your lending limits then i would probably avoid taking on more debt that you will need to service and I would look to be doing the bulk of your requirement for growth via equity.

Either a private equity raise from friends and family, crowd, angel etc etc, or use of regional funds or private equity if you are established enough and doing sufficient revenue to justify involvement.

I would however point out that capital raising for business at the moment IMO either via debt or equity is still challenging, you will have your work cut out for sure. Good luck

 

[John_V85]

IMO Banks are unlikely to offer you anything more than you already have from the likes of funding circle they are like umbrellas in the sunshine frankly.

Can you elaborate a little bit on why you say this? If profit/cashflow (revenue is vanity and all that) is X and lenders currently are prepared to lend Y, and now profit moves to 2X surely Y would change as well, no?

For the avoidance of doubt, we're not trying to borrow more than the likes of funding circle, etc. will offer on the same profit. It's that we're outgrowing the hard £ limit on borrowing that these kinds of lenders all seem to operate with irrespective of profit. Thanks

 

[Mark T Jones]

Whilst I can't directly answer the question, I do know that banks aren't keen on offering 'non-specific' loans - Eg marketing / business development - they tend to look for a clear & defined plan & purpose.

In line with the above, there are inherent risks in funding growth entirely through debt, particularly the wrong kind of debt.

If debt is definitely the right way, start looking at purpose-specific products - asset finance for equipment, invoice finance for trade debt etc etc.

These tend to be more accessible and inherently the right profile for purpose.

 

[Porky]

@John_V85
Because in my experience, put simply they don't like risk. They are risk adverse, where there is some risk they like to cap off at a low level and ensure its fully protected against unless of course you have a property or bricks and mortar asset you can put up as collateral to cover that risk aspect but even then it will be like extracting teeth.

My advice John is to give it a go, see how you get on. I already know the result but you need to experience it for yourself to fully understand how crap they are and all the hoops you will jump before they ultimately decline you.

Sorry i can't paint a more positive picture but from what you are telling me, you are already at capacity with your current facility, it's non specific working capital you want by the sounds of it and IMO for what its worth a debt vehicle beyond where you already are is not really appropriate for that, you need to raise capital via equity as i see it.

But as i say, please give it a go, you never know you might surprise me

Good luck

 

[AimFinancial]

Hi John - In your current position it would be worthwhile talking to someone who can review your overall funding structure along with what you are trying to achieve. Would suggest either your accountant (if you trust their advice) or an experienced whole of market broker.
Non specific loans are useful but a bit of a blunt tool - and where they tend to have pretty aggressive repayment terms and relatively high interest rates, having too many will impact your ability to borrow more.
Marks comments above (in my opinion) are true in that using the right kind of finance with the right structure will help to support your ongoing business goals.