Raising low-interest business finance

Discussion in 'Accounts & Finance' started by rubaba, Jan 18, 2020.

  1. rubaba

    rubaba UKBF Newcomer Free Member

    21 1
    Evening all,

    Wanted advice from members on how to raise finance for my company.

    We use HSBC as our bank and have no loans/overdraft facility due to the fact we have never needed it. However, sometimes i miss out of good deals because if i did, it would affect cash flow .

    Our company turnover circa 4/5 million a year and is 11 years old, with minimal creditors.

    If for examaple, i wanted a loan of 100-200k from the bank, what amount of % on interest would they charge?

    Are there any other ways of raising finance without a PG, where % are minimal.

    Thanks in advance
     
    Posted: Jan 18, 2020 By: rubaba Member since: Aug 20, 2018
    #1
  2. Mr D

    Mr D UKBF Legend Free Member

    20,724 2,390
    Other ways? Friends and family are cheapest - likely accept a percentage that isn't realistic for the investment.

    May be worth looking into getting an overdraft so you can do the good deals. You don't pay interest until you start using it. Or build up a war chest of funds in a savings account with easy access.
     
    Posted: Jan 18, 2020 By: Mr D Member since: Feb 12, 2017
    #2
  3. rubaba

    rubaba UKBF Newcomer Free Member

    21 1
    I have that opportunity but if the business goes tits up then it will affect my relationship with them which is not worth it.

    What are the pros/cons of going to some one like funding circle?

    What % do banks typically charger on 100-200k
     
    Posted: Jan 18, 2020 By: rubaba Member since: Aug 20, 2018
    #3
  4. fisicx

    fisicx It's Major Clanger! Staff Member

    31,892 9,383
    Depends on how good your credit rating and the risk of it going tits up.
     
    Posted: Jan 18, 2020 By: fisicx Member since: Sep 12, 2006
    #4
  5. Gordon - Commercial Finance

    Gordon - Commercial Finance UKBF Ace Free Member

    2,101 635
    You won’t get an unsecured loan without a personal guarantee.

    Pros of going to funding circle are that they’re really the only player in the market for unsecured business loans.

    Cons, they will take a personal guarantee, and by the sounds of it you won’t think their interest rates are “low”.

    Bank probably wouldn’t loan £200k tbh, so you needn’t really ask what rate they will charge.
     
    Posted: Jan 18, 2020 By: Gordon - Commercial Finance Member since: Jun 26, 2017
    #5
  6. rubaba

    rubaba UKBF Newcomer Free Member

    21 1

    Can you explain what secured/unsecured loans mean in layman terms.

    Why would a bank not loan that amount if the business has healthy figures?

    What about invoice finance?
     
    Posted: Jan 18, 2020 By: rubaba Member since: Aug 20, 2018
    #6
  7. MY OFFICE IN CHINA

    MY OFFICE IN CHINA UKBF Big Shot Full Member

    4,885 1,105
    Secured (usually against a property), if you default on the loan, the lender can/will sell the property to get back their funds.

    Unsecured, the lender is at risk that if you default on the loan, you will not have the means to pay them back.

    Healthy figures now and in the past does not guarantee future figures will be positive. We live in a risky world, where money lending is concerned.

    Invoice factoring is an option, but they may want to include ALL your customer invoices, not just the invoices that you want them to factor.

    If you have a property with equity, a remortgage may be a preferred option to raise the finance you need.
     
    Posted: Jan 18, 2020 By: MY OFFICE IN CHINA Member since: Nov 16, 2011
    #7
  8. Mr D

    Mr D UKBF Legend Free Member

    20,724 2,390
    Business goes under the bank likely will be one of several creditors with only a percentage, at best, of the loan recovered.
    Hence wanting security of one kind (asset for example) or another (you).
     
    Posted: Jan 18, 2020 By: Mr D Member since: Feb 12, 2017
    #8
  9. Gordon - Commercial Finance

    Gordon - Commercial Finance UKBF Ace Free Member

    2,101 635
    Invoice finance is a different ball game altogether from unsecured loans. Although if you’re just needing cash flow it may be useful.

    The figures you’ve provided are a bit sparse - so it’s hard to say what your options are really without having a chat.
     
    Posted: Jan 18, 2020 By: Gordon - Commercial Finance Member since: Jun 26, 2017
    #9
  10. Ian J

    Ian J Factoring Specialist Full Member - Verified Business

    5,712 1,726
    There are invoice factoring companies around that don't insist on all invoices and don't tie you in to minimum amounts or contract lengths either
     
    Posted: Jan 19, 2020 By: Ian J Member since: Nov 6, 2004
    #10
  11. JEREMY HAWKE

    JEREMY HAWKE UKBF Legend Full Member

    4,617 1,487
    I am in the same position all be it I have decided to avoid borrowing and not expand the business again or anymore .

    When I needed the money to borrow nobody would help Now I have decided to be on the safe side and run a business without borrowing everybody wants to lend some money :):):)

    For me I feel a lot more comfortable without the worry

    As already pointed out you will always be personally liable for any borrowings
     
    Posted: Jan 19, 2020 By: JEREMY HAWKE Member since: Mar 4, 2008
    #11
  12. Mark T Jones

    Mark T Jones UKBF Big Shot Free Member

    4,300 1,494
    What is your definition of low? And what are you comparing with?

    Before worrying about APRs you really need to be looking at what your actual requirement is for and - above all - how long/how often you need it

    As a broad rule, you could say that the cheapest form of borrowing is the one you use least often, the most expensive without question is one where you can’t meet the repayments (that’s where ‘clever’ people who use interest free credit cards often fall over)

    If you need money for a few days a month, or a couple of months a year then overdraft or invoice finance might well work.

    If you will have a big-hit spend which is set to pay back over several years, then loan or potentially asset finance are likely to work.

    Re PGs - it really depends on how good the figures are and what the underlying security is. The reason ‘unsecured’ lenders require PGs is that the lenders have learned the hard way that too many unscrupulous business owners (there are a few on here) worked out that they could siphon the cash and Phoenix the business, thereby driving up rates and making things harder for honest borrowers

    Out of interest, how confident are you in your growth plan?
     
    Last edited: Jan 19, 2020
    Posted: Jan 19, 2020 By: Mark T Jones Member since: Nov 4, 2015
    #12
  13. Gettingthereslowly

    Gettingthereslowly UKBF Newcomer Free Member

    8 0
    My bank recently lent limited co. £265k.
    Terms were:
    Secured against property (that had no mortgage on)
    15yrs term
    Variable 3.3% per annum (could have fixed for 5yrs at 3.8%)
    1% arrangement fee (£2650+vat)
    Repayment basis
    Can make over-payments without restriction
     
    Posted: Jan 20, 2020 By: Gettingthereslowly Member since: Nov 14, 2019
    #13
  14. Gordon - Commercial Finance

    Gordon - Commercial Finance UKBF Ace Free Member

    2,101 635
    That’s nice.
    But very, very different to what the OP is looking for.
     
    Posted: Jan 20, 2020 By: Gordon - Commercial Finance Member since: Jun 26, 2017
    #14
  15. Neil Lukins

    Neil Lukins UKBF Contributor Full Member

    55 5
    With Business loans if you can offer something as security over the lending then your rates will be cheaper. Lenders can take property, machinery, equipment or invoices as the main security.

    There are one or two lenders out there who will lend without taking a PG. As their risk is higher then this is often be reflected in the rates. These non PG lenders will only provide funding against profitable established businesses with clean a credit history.

    If PGs are an issue then you could look at PG insurance which can help protect a percentage of the loan.

    Bank lending is the cheapest form of lending but banks are leaning towards good credit established businesses.

    Neil
     
    Last edited by a moderator: Jan 21, 2020
    Posted: Jan 21, 2020 By: Neil Lukins Member since: Sep 7, 2017
    #15
  16. Martin Kennington

    Martin Kennington UKBF Newcomer Free Member

    17 4
    If you take card payments, then a business cash advance could be suitable for you (repayments are made as a percentage of your card sales), perhaps as an alternative to your option of invoice factoring.
     
    Posted: Jan 21, 2020 By: Martin Kennington Member since: May 22, 2019
    #16
  17. Ayaz

    Ayaz UKBF Newcomer Free Member

    29 1
    Go for some islamic banking options. No interest only rents and if you pay early then all coming rents will be waived off
     
    Posted: Jan 22, 2020 By: Ayaz Member since: Oct 26, 2018
    #17
  18. Mark T Jones

    Mark T Jones UKBF Big Shot Free Member

    4,300 1,494
    ‘no interest’. Technically true. But plenty of other costs equivalent to interest
     
    Posted: Jan 22, 2020 By: Mark T Jones Member since: Nov 4, 2015
    #18