Here is another in our periodic sharing of frequently asked questions directed to us here at ACF Direct.
This time the subject is business finance and the role of a finance broker.
Why do I need a broker, as opposed to finding my own finance?
You are, of course, perfectly at liberty to pursue your own routes for trying to obtain the type of business finance you are looking for.
However, there are a number of reasons why the help of an experienced finance broker might be advantageous:
- a finance broker should understand which potential lenders are likely to be receptive to your individual proposition. They may be able to stop you wasting your time (and damaging your credit file) in applying to lenders who are most unlikely to give you a positive response;
- the finance broker may well have contacts that might not be available to the general public;
- some lenders, notably certain “Business Angels”, only accept curated applications. They might only accept propositions for consideration that a finance broker has already reviewed and approved as compliant, in advance.
Does using a broker guarantee success?
No. Only the merits of your own proposition will ultimately secure you the business finance you need. However, your chances of success may be significantly increased if you do go through an experienced finance broker.
How important is my credit history?
This is an often-asked question but one that is difficult to respond to in general terms.
If you are a sole trader or partner in a very small enterprise, your personal financial status is likely to play a significant part in a potential lender’s assessment of your proposition. Do note though – that is not the same thing as saying that your application will fail if you have credit history issues on your records.
If you are an established business with formal accounts, they and what they say about your business’s past performance may typically carry far more weight than any credit scoring reviews of individuals within it.
Will the cost of my funding vary depending upon the broker I use?
Typically, the biggest single factor in determining how much your business finance solution will cost you overall is the degree of risk that the potential lender associates with your request.
Even so, some finance brokers may be able to find more cost-attractive solutions for you than might be the case with other brokers.
Will I be able to secure business finance if my business is in trouble?
A lot here will depend upon the nature of the problem your business is experiencing.
Some business problems can be clearly attributed to a very short-term and unfortunate set of circumstances. The classic example of this is perhaps short-term cash flow glitches arising when a customer has delayed payment or has ceased trading leaving debts behind them.
In such cases, securing some form of business finance assistance may well be possible and even relatively straightforward.
The above circumstances though all presume that an analysis of your business metrics indicate that the business is fundamentally sound.
If your business is in financial difficulties because it is simply not a viable commercial proposition, it may understandably be far more difficult to secure additional funding – unless the request is clearly seen to be something that will resolve any existing fundamental problems.
How do I proceed with my business funding request?
Why not contact us for an initial and entirely informal discussion? We will quickly identify the general characteristics of your situation and be able to discuss things further with you.