3 Ways to Strengthen Your Business Finance Application
Applying for business finance isn’t simply about whether a company can borrow. Lenders also need to understand how much funding is required, what it will be used for and whether the proposed facility makes sense for the business.
Preparing properly before approaching the market can make the application easier for a lender to assess and help identify which funding structures are likely to be appropriate.
Here are three areas worth considering before making a business finance application.
1. Define the Funding Requirement Clearly
Before thinking about lenders, start with the requirement itself.
A lender will typically want to understand how much capital the business needs, what the money will be used for and how the proposed funding fits into the company’s wider position.
Rather than simply asking for the maximum amount available, businesses should have a clear commercial reason for the funding.
For example, £100,000 required to purchase additional stock ahead of confirmed demand presents a different proposition from £100,000 requested without a clearly defined use.
The purpose can also influence which type of finance should be considered.
A business purchasing machinery may be better suited to asset finance, while a company experiencing a gap between issuing invoices and receiving payment could potentially consider invoice finance.
Other requirements may be better suited to a term loan, revolving credit facility or another form of commercial funding.
Start with what the business needs to achieve, then consider the finance required to achieve it.
2. Make Sure Your Financial Information Tells the Full Story
A lender needs enough information to understand both the historic and current position of the business.
Exactly what is required will depend on the lender, facility and size of the transaction, but businesses may be asked to provide documents such as recent bank statements, filed accounts and management information.
The numbers themselves are only part of the picture.
If turnover has changed significantly, profitability has temporarily fallen or an unusual transaction appears within the accounts, providing context can help a lender understand what has happened.
The same applies to previous credit issues.
A historic CCJ, missed payment or other adverse-credit event doesn’t necessarily mean business finance is unavailable. However, understanding the circumstances from the outset can help determine which lenders are appropriate for the application.
Being open about the financial position of the business can therefore be considerably more useful than approaching lenders without the complete picture.
3. Approach the Right Part of the Lending Market
A strong business can still receive a decline if it approaches a lender whose criteria do not fit the requirement.
Commercial lenders have different appetites.
Some specialise in particular sectors or types of finance. Others may have minimum turnover requirements, restrictions around trading history or different approaches to security and adverse credit.
This means the question isn’t simply:
“Will someone lend to my business?”
It is also:
“Which lenders are appropriate for this particular requirement?”
Repeatedly approaching unsuitable lenders can create unnecessary applications without addressing the underlying funding need.
Taking a wider view of the market allows the requirement to be considered against different lenders, products and potential structures.
Building a Stronger Funding Proposition
A well-prepared finance application brings these three areas together.
The funding requirement should be clear, the supporting financial information should provide an accurate picture of the business, and the application should be directed towards lenders with an appropriate appetite for the opportunity.
This doesn’t mean every application will be approved. Lending decisions remain subject to individual lender criteria, underwriting and affordability.
It does, however, mean the business can approach the finance process with a much clearer proposition.
How Revia Helps Bridge the Gap
Finding finance is only one part of the process. Identifying how a requirement should be structured and which lenders are appropriate can be equally important.
Revia works with businesses to understand the funding requirement and wider financial position before considering potential solutions from across our lender network.
We can then help structure the opportunity, prepare the relevant information and approach lenders whose criteria are appropriate for the requirement.
Whether you’re looking for working capital, asset finance, invoice finance, property funding or a more complex commercial facility, our role is to help bridge the gap between your business and the lending market.
