Banks form one of the biggest sources of credit for businesses. They offer a variety of financial accommodations based on your preference and situation. Some of their financing options are:
Long term loans
This option allows you to borrow money over a set period of time and repay with interests according to agreed instalments. You can use this type of loan as working capital, mid-term or long term plans.
Overdrafts and Credit Cards
You can use an overdraft facility or credit card when the cash flow of your business is low, especially for seasonal businesses. This would enable you to continue in operation until cash starts coming in again. If your business has an account with Barclays, a Barclaycard Business credit card is a great way of meeting its short term financial needs.
Cash Flow Finance
With cash flow finance, your business can borrow money from a bank on the security of its unpaid invoices. This is a very fast method of obtaining credit and takes less than 24 hours to get up to 85 percent of the value of your approved invoice. The remaining amount of the invoice value, less the lender’s charges for invoice financing, is paid as soon as your customer pays the invoice.
Loans against Assets
You can borrow money from a bank against a range of your company’s assets such as inventory, equipment and property. Banks will give you money depending on the value of the asset that you are offering as security. This kind of borrowing is very effective in raising funds for working capital or investment. If your business does not have sufficient assets to secure the loan that you require, you can still borrow on the security of your own assets such as residential property or a share portfolio in another company.
In order for the bank to finance your existing business, you will need to provide key financial information including profitability, sales forecast, cash flow and growth potential. The bank must be satisfied that your business is sound with a healthy cash flow to be sure that you will repay the loan. In particular, you should have the following ready before approaching a bank for a business loan.
- A current balance sheet for your business
- Recent profit and loss statement for the business
- A full and up to date tax returns for the business
- Information about your personal assets and liabilities
- Details of your qualifications and where applicable, any previous experience in running a business
- The details of the equity you plan to inject into the business
- You may also be required to provide a forecast of expected profit, loss and cash flow for the first two years.
Where you are seeking a bank loan for a business which is just starting, the details required are slightly different from those needed where a business is already in operation and would include a business plan.