Funding for start-ups – an overview

Let’s start with the bad news – In a tough economic climate there will always be a tightening in criteria for start up finance.  The better news is that there is still funding available; we at Fit Out Finance are still able to help well researched, properly set up start-ups with funding.

What is a start up in finance terms?

Most of the market defines a start up as a business that has been trading less than 2 years.  Some will extend that 2 years to include a requirement for 2 sets of published accounts (So in theory up to 3 years).

In a recent development, some lenders have narrowed their scope to include the provision that they must have been trading for a minimum of 3 or 6 months. So this effectively excludes pre-starts and those in extreme early stages.

On the other hand, there are what may be described as ‘technical start ups’. A frequent example is roll-outs of outlets, where for practical or accounting purposes, each new outlet is a new company, though the group itself is established and profitable. Lender attitudes will vary, but in many cases, these will be treated in line with their parents rather as opposed to your regular start-up.

Why do lenders treat start-ups differently from established businesses?

All reputable lenders will undertake checks on affordability as part of their credit process. This means using available information to establish whether a borrower is likely to be able to meet repayments when they fall due.

Whilst there are many different approaches, the most solid and reliable tools available are historical trading information and past credit performance (including repayment history).

By definition a start up won’t be in a position to provide this information in a meaningful way, so lenders have to base their decisions on whatever information is available. This will vary from one lender to another, but is likely to include:

  • A business plan with projections.
  • Relevant experience of owners/key individuals.
  • Financial credibility of business owners.

Since credit decisions are based largely on predictions rather than solid experience it is usual for lenders to require some additional ‘fallback’ security – usually in the form of personal guarantees from the owners. Many lenders will insist that guarantors are homeowners.

What types of finance is available to start-ups?

Whilst accessing finance is slightly less straight-forward for start-ups, there are still many lenders out there, offering a full range of business funding products including:

  • Term loans – Secured.
  • Term loans – Unsecured (Read more about Start Up Loans below)
  • Asset finance.
  • Invoice finance.
  • Merchant cash advance.
  • Commercial mortgages.

There are probably others too!

What are Start Up Loans?

I am referring here specifically to the Government-backed Start Up Loan scheme; whose purpose is specifically to fill the gap left by banks and independent lenders. In fact, there is a little-mentioned provision that applicants should have already been declined by their bank.

Unlike commercial lenders, Start Up Loans will never seek bricks & mortar security; nor will they take up-front fees.

There are qualifying criteria, however most of their decision-making revolves around a solid, researched business plan.

It’s State assistance rather than a commercial facility – That comes with a big slug of bureaucracy but more lenient lending parameters.

Contact Us

Are you a start up business looking for an instant cash injection get you on a roll? Why not get in touch today? Give us a call on 01494 422 614, or send an email to [email protected] to see how we can help fund your business.

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Our Complaint Handling Procedure

Throughout this blog I will be clarifying the steps of our complaint handling procedure here at Fit Out Finance. We like to ensure all customers are left satisfied with our quality of service. However, if this is not your case and you are left dissatisfied in your experience with us, we are always looking for ways in which we can improve and would appreciate any given feedback. So, if you have a complaint about any aspect of our service, we would like to hear from you. You can contact us via email, telephone or in writing. To aid us in processing your complaint as soon as possible, we ask that you contact the department by which you have been dealing with. Our contact details are provided at the end of this blog.

We will try our best to resolve your complaint immediately, however, this may not always be feasible. Thus, please allow us up to five days to handle your concern. All complaints are logged on to our internal database system and you will receive a unique reference code. Here we also keep information on the nature of the complaint, our actions to resolve the issue at hand and any recommendations we make.  We will carry out a thorough and impartial investigation of any issues raised.

Next, our Compliance Officer will write to you with the outcome of the case. This will either be by post or email. We hope that the response will be satisfactory to you, if this is the case, we can then close off the complaint.

Not satisfied with our response?

However, if you remain dissatisfied with our response, a director will assess the case to evaluate whether any further action can be taken. Alternatively, if you have a regulated agreement with us and are not satisfied with our final response, you may be eligible to refer the matter to the Financial Ombudsman Service. However, you must do this within six months of our final response. If you are not satisfied with our response and no final response has been received by us, we will refer the matter to the FCA 8 weeks from the initial complaint. Or if the final response has been received and you (the customer) are not satisfied, the service is free of charge, and they can be contacted via their website, www.financialombudsman.org.uk/consumer/complaints. This does not affect your statutory rights.

Contact Us

Telephone: 01494 422 614

E-mail: [email protected]

Address:

18 Manor Courtyard
Hughenden Avenue
High Wycombe
Buckinghamshire HP13 5RE
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Secured loans to fund Fit-Outs

Secured loans to fund fit-outs

In a hard lending environment, prospective borrowers are increasingly being asked for security to support funding applications. These can be for fit-out projects, particularly in sectors that might be susceptible to future lockdowns, such as hotels, restaurants and leisure businesses. This is why secured loans to fund fit-outs are so important.

In lending terms ‘secured’ typically refers to charges over bricks and mortar premises, not, as some assume, to guarantors.

Fit Out Finance

In response to this, Fit Out Finance has connections with several reputable secured loan providers who can offer facilities supported by first, second or third charges against freehold or long-leasehold premises, whether those premises are commercial or residential. This will allow you to use secured loans to fund fit-outs easily.

With the added security of charges over property, lenders will be more relaxed over other transaction terms. Therefore they will be able to offer much more flexibility against conventional equipment leasing facilities. With security, we can offer facilities over periods up to 10 years rather than the usual 5-year maximum. In a recent case, our client benefitted from a 6-month payment holiday at the start of the agreement. They can earn money before they start to make monthly payments.

Improving relationships

Additionally pre-payments and staged payments than on a normal leasing transaction. These are things that can improve your relationship and terms with your chosen fit-out contractor or selected trades.

To suit your tax and accounting requirements, the transactions is documented as a loan or a lease agreement. Restricted by the nature of the equipment or the number of suppliers, this affects such transactions. 

Properties acceptable as security include the main residence, rental properties (either individual or portfolios) or commercial properties. In some cases, we are also able to consider non-bricks and mortar assets as security. This includes classic vehicles, boats or share portfolios. The key criterion is that it can be professionally valued, and it is possible to put a charge on it.

Commercial vs Residential

On another note, you need to give thought to putting residential property up as security when that property is the family home. For our part, Fit Out Finance takes this seriously. So much so that we will suggest that you take professional advice from a recognised legal practitioner before committing to a transaction. We will never rush or push you into signing. We respect the need for careful consideration before entering into a secured finance transaction.

For businesses that own their premises, it makes sense for the charge to be over those commercial premises. Alternatively, charges can be over multiple investment properties in a portfolio. Thus leaving the all-important family home out of the equation.

Contact Us

The majority of our business is likely to remain as conventional unsecured lease, loan or hire purchase. Alternatively, the availability of good, professional secured loan facilities. This means that fit out finance can be available in circumstances where normal agreements won’t work. For more information, call 01494 422 614 or email [email protected].

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Coronavirus Business Interruption Loan Scheme – What Finance is Available?

Coronavirus Business Interruption Loan Scheme Our Government has pre-announced a ‘Coronavirus Business Interruption Loan Scheme’ scheme specifically to help businesses affected by Covid19. Full details have yet to be released – launch probably won’t be until April; however it is pretty certain to be operated under the banner of the current EFG, with the same […]

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Fit Out Finance teams up with Transmit to offer funding for new start up business

Fit Out Finance Teams up with Transmit to offer funding for new start up business Fit Out Finance is pleased to announce that we have entered into an affiliate agreement with Transmit Start-Ups. Consequently, this enables us to offer start-up loans under the official British Business Bank Start Up Loan scheme.

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Brexit creates unprecedented demand for warehouse fit out finance

Brexit creates unprecedented demand for warehouse fit out finance Stockpiling due to Brexit fears is creating unprecedented demand for warehouse space. And as a result of this is creating growth in the market for financing of warehouse fit out.

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3 Reasons why you shouldn’t write a business plan for a lender

All businesses have their own myths, a remarkable persistent myth around business borrowing is the notion that you have to write a ‘special’ business plan for lenders; by special, the implication is always that figures need to be bumped up, that it should include glossy pages and pictures and that there should be loads of superlatives and frivolous promises.

And here’s the thing – at best this ‘special’ plan will be a waste of time, at worst it will be an extremely costly error that will actually put lenders off dealing with you.

Over the years, I’ve had clients who pay accountants or consultants £5,000 or more for plans that are frankly, comical – the biggest irony is that the firm who has charged all the money wants to haggle a couple of points on the interest rate to justify their fee.

So, to save you time and money, here are 3 reasons why you shouldn’t invest huge amounts of time on effort in a special plan for lenders:

  1. It’s your business and your plan. Quite simply you really do need to create a straight forward plan which illustrates both the need for money and the capacity to repay it. Without that simple but realistic plan you won’t know how much you need, when you need it or what type of funding is best for you.The most expensive form of borrowing is the one that doesn’t meet your needs.
  2. It’s a discussion document. If your plan is read by the decision maker, the next stop is that they will want to talk it through – If you have made up facts and figures to impress a lender you won’t be able to discuss them with confidence or depth, all you will have done is prolonged the journey to being declined.
  3. Lenders aren’t stupid. The implication of the ‘special plan’ myth is that lenders will automatically reduce everything by a certain percentage, hence you have to build it up to counter this. It won’t happen. What they will do is challenge certain assumptions. If those assumptions are way off the mark they will assume that all other assumptions are similarly amiss. If you are informed and close to reality, they will judge you as such.

So yes, you do need a thought through plan, and it does need cashflow projections. You need it for yourself before you even contemplate looking for funding, otherwise you will be pitching cluelessly between different types of funder and the worst eventuality is that you will succeed in getting funding against a fictional document.

You might want professional input from an accountant or a marketing specialist, but you, not they should create the plan.

Save yourself time and money, there is no need for

  • Glossy printing / presentations.
  • Pages and pages of hyperbole and waffle.
  • Mountains of technical detail.
  • Pretty financial graphs.
  • A mission statement.

KISS!

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