Chris Kelly, of Jacobs Allen Accountants, offers advice on obtaining finance for your small business
Most small businesses usually start looking for finance just days before they need it and then only spend a few hours researching their options on the internet.
By leaving it until the last minute the number of lenders who would be able to help in time are restricted and the interest rates likely to be much higher.
Often a business will end up applying to one of the big High Street lenders without considering the many other alternatives now available.
However, High Street lenders have a more limited product choice and usually more restrictive lending terms.
Where should businesses go to obtain advice?
Brokers can assist but as this relationship is usually a one-off transaction, they may not have an in-depth understanding of the business and its financial position.
Accountants, however, are ideally placed to support businesses in obtaining finance as part of the advice they provide over the life cycle of the business.
Chartered Accountants are professionally qualified and regulated and can access the most suitable solution from the whole of the market.
Whilst a business could obtain finance directly without advice this can cause problems if this results in refusals due to applications to the wrong funders or for the wrong products.
What is the ‘right’ finance?
The following need to be considered to ensure the best result is obtained:
- The amount is correct for the business needs.
- It is affordable.
- The duration is suitable.
- The product is the most suitable available.
- The security provided is not overly onerous.
- The interest rate and charges are the most competitive.
How can a business make itself more attractive to funders?
A good credit score will make obtaining funding much easier and cheaper. It is therefore important that a business monitors their credit score before making an application for finance to see if could be improved in advance.
Having up to date and reliable cloud accounting information available means this it can be used to support a funding application. Without this information there is a risk that the wrong solution is obtained.
Some newer lenders can connect directly to a business’s live cloud accounting data in order to streamline the application process.
Other Options
If a business is experiencing short term working capital difficulties and struggling to pay its tax liabilities on time the easiest option can be approaching HM Revenue & Customs to agree a Time to Pay arrangement. These arrangements usually consist of agreeing to pay off tax debts in monthly instalments over an 18 month period.
Your Accountant
Your Accountant is ideally placed to support businesses obtain finance as part of the holistic package of advice on funding, cash flow and other financial matters they provide and should be involved at an early stage.
