I have only ever dealt with my bank, what are the choices?
There have been several reports recently that have depicted the current understanding, by the UK’s SME’s, of lending options outside of the traditional banking model.
For example in 2018, 70% of SME’s did not look into further funding solutions once their bank had said no, as reported by the British Business Bank. Another report by one of the UK’s alternative lenders suggested that 2,000 business owners were aware of alternative solutions but didn’t know how to go about organising an alternative funding solution. More recently another report showed that in industrial cities such as Birmingham business lending from traditional high street banks had reduced year on year by as much as 56%, with uncertainty of Brexit being the biggest contributing factor.
There are many alternative lending options to traditional banking facilities, certainly with the demise of the overdraft.
Over the coming weeks, I will be letting you know, some of the alternative lending options available, and some of the tips or things to know before applying to ensure you either have the best opportunity or whether the solution will/won’t work for you.
The first solution I’ll look at is unsecured business loans from peer 2 peer lenders.
These types of lending opportunities come with many positives, though some business owners see this as expensive and risky. Here are some of the benefits;
- Better rates than some high street banks – Some lenders will have rates starting as low as 1.9% APR
- No need for business plans – If you are an established business (2 years or more) you won’t need a business plan for your application
- Quick turn around – Some peer to peer lenders can provide a pay-out within 7 days from your initial application
- High maximum loan values – Subject to underwriting some peer 2 peer lenders will offer up to £500,000 of unsecured lending, most high street banks will limit this to £100,000
- No repayment fees – Unlike some high street business lenders, most peer 2 peer lending solutions won’t charge you an early repayment fee if you choose to clear your loan early
It is best to always ensure you have a copy of your last full accounts; with Profit and Loss info, Balance Sheet details and all notes. 3 to 6 months bank statements are typically required, and always keep your managements up to date. Be prepared to give a personal guarantee for all Directors or Shareholders with 20% or more, as most if not all lenders require this as part of their underwriting process.
Keep posted for our next instalment…..