"I need funding but I cant get an overdraft, and I have no assets to put up for security so what are my options?"

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The first thing to remember is your business is valuable to funders. They need you as much as you need them, it is a competitive business and we are here to ensure they work hard for your business and provide the level of funding and service that your business needs.

Funding involves the management of risk. So most funding propositions have to answer specific questions

1. How much is required and how for long?

2. What is the purpose of the loan, i.e cash flow or capital?

3. What is the current risk in terms of business performance?

4. What is the current risk in terms of business exposure to debt and insolvency?

5. How can we mitigate risk? What can we use to secure our position ? assets? sales ledger?orders? etc

6. How do we get an exit

7. Do we trust and like the shareholders and or directors or owners?

So you need a plan which sets out clearly and more why the funds are required. To have creditability the plan has to be realistic and honest about the purpose of the funds, what security is available and how the funder can get an exit.

Funding needs to match the requirement of the business. If cash is required to invest in new equipment or capital assets then commercial funding such as sales invoice factoring or invoice discounting is properly not the best route, but if the business model needs day to day cash flow then commercial funding could be ideal. The matching of a clients specific needs and circumstances is critical if you are not to spend endless hours making applications and attending meetings only to be rejected. Our skill is knowledge of the market and knowledge of who is going to love to do business with you!

Asset based funding decisions are normally made on the quality of the asset being purchased and the general demand for that specific asset and less interested in the business performance or net worth of the business balance sheet. They secure their position by retaining ownership of the asset until it is paid for and generally funders exist to match all proposals from prime propositions such as a profitable and long established business purchasing a new van fleet to a sub prime proposition like a new company wanting to purchase a single van. Specialist equipment is inherently more risky as the market for resale is also limited and specialist, this effects second hand or recovery values. If you are looking for asset based funding give us a call and we ensure we match you with two or three funders without you wasting huge amounts of time trying to secure finance from a lender whose criteria you do not meet.

Commercial funding such as sales invoice factoring (factoring) and confidential invoice discounting (CID) and is an invaluable source of ongoing and long term working capital. Again it is critical to work with a funder that “loves to do business with you” this means they need to understand your business, understand the challenges you confront and can support your goals and aspirations. Factoring or CID sometimes gets a bad press with business having varying experiences of how the process works, but in our experience problems only occur when the wrong funder is working with the wrong business. When you match funders and ensure a full support is available to the business commercial funding works really well and can provide the cash to drive growth.

The concept of invoice funding is relatively straight forward in that you have ownership of a sales ledger made up of a sales invoices which for the sake of argument is worth £100,000 if you could get your customers all to pay up immediately. The problem is that these debtors or debt book contains the business working capital and profits and until the invoice is paid our cash is either in the stock room or in our customers bank accounts. Commercial funders simply arrange to pay up to 80% [sometime 100%] of the value of this ledger within 24 hours to you for a fee. So in this case you would receive £80,000 within 24 hours of providing notification and the balance when the client actually pays the invoice. This system of funding works really well for a growing business that needs to fund new orders that are coming in faster than they can collect the cash from old invoices.

The various methods of delivery allow the customer to take advantage of the essential funding with option such as credit control, debt insurance and confidentiality all added in. If you think commercial funding is an option then please give us a call, we can match you with funders who understand your business model and we will ensure the offer is competitive and meets your needs.

Securitising the Debt

As explained most of the funding models we work with require no additional security than the asset at the heart of the model. If it is an asset based funding then the asset itself provides security, if the funding is based on advancing cash against the sales ledger then the sales ledger provides the security.

The role of Debentures such as Fixed and Floating Charges

Commercial funders and banks will securitise their loan or funding by way of taking a debenture against all the assets of the company by way of fixed and or floating charge. This allows the funder to appoint Administrators in the event of a default or insolvency. It is a serious matter and you need to take appropriate advice before agreeing to a debenture. Again you have to be realistic if a debenture is required then you may have no choice but to sign but a debenture taken by a company you work well with and understands your business is one thing, a debenture given to an unethical lender could be suicide. For further advice call 4R now.

The role of Personal Guarantees

Directors are often asked to sign a personal guarantee. Funders (who do very little investigation into if the director has the means to discharge the debt should it fall due) often request personal guarantees from directors and shareholders as a sign of commitment. After all if the director is nervous of the financial circumstances then why should they lend?

On the whole we would not recommend any director or shareholder to sign an open ended Personal Guarantee. However, again you have to realistic about the proposition and the commitment you are being asked to make. If we were asked to sign a personal guarantee from a trade supplier we would refuse and go else where, if a commercial funder is lending against a good quality sales ledger we would assess the risk as low and agree to a personal guarantee but we would be seeking to renegotiate and limit they personal guarantee every six months. So is it not so much the personal guarantee that is the problem but the terms and conditions of the personal guarantee that

Get in touch today and have a chat with one of our friendly experts that are here to help you on 0800 902 0123.

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