Business expansion funding
Growth usually consumes cash before it returns it: new premises, additional staff, inventory, marketing and the working capital gap that opens while revenue catches up. Expansion funding needs to be structured with that gap in mind, not around a repayment profile that assumes revenue arrives immediately.
- New sites and additional locations
- Increased inventory and improved supplier terms
- Team growth and associated overheads
- Capacity investment and market entry
Working capital facilities
Working capital finance bridges the timing difference between paying suppliers and being paid by customers. The right facility flexes with that cycle rather than locking the business into fixed repayments that do not match its cash flow.
- Overdrafts and lines of credit
- Cash flow finance against trading performance
- Invoice finance and debtor funding
- Trade and supplier finance
Business overdrafts and lines of credit
A line of credit provides access to funds as they are required, with interest generally charged on the amount drawn. It suits businesses with predictable fluctuations rather than a single, one-off funding need, and it is usually reviewed annually.
Business acquisition funding
Acquiring a business or a competitor requires a lender to underwrite both the target and the combined entity. Purchase price, earnings multiples, vendor terms and the buyer's existing position all form part of the assessment.
- Share and asset purchases
- Management buy-ins and buy-outs
- Coordination with vendor finance arrangements
- Goodwill and intangible asset funding
Secured and unsecured business lending
Secured lending
Residential or commercial property, business assets or equipment can be offered as security, typically improving pricing and borrowing capacity. Security is not a substitute for servicing, but it does widen the panel of lenders willing to consider the application.
Unsecured and cash flow lending
Unsecured facilities are available, although they are usually smaller in size, more conservatively priced and more dependent on trading history, debtor quality and the directors' credit profile.
How lenders assess a business loan application
The same set of facts can produce different outcomes at different lenders. Understanding the four areas below explains why.
Financial performance
Most lenders review at least two years of financial statements alongside recent management accounts and Business Activity Statements. Declining revenue, thin margins or a large one-off year require explanation, not concealment.
Cash flow and servicing
Servicing is calculated from the business's capacity to meet repayments out of operating cash flow, adjusted for add-backs, depreciation and existing commitments.
Industry and risk grading
Some lenders specialise in particular industries and others avoid them entirely. Matching the application to a lender whose appetite fits the industry materially improves the outcome.
Entity structure and guarantees
Director guarantees are standard. The structure of the borrowing entity — company, trust or sole trader — affects both the credit assessment and the tax treatment, which should be discussed with your accountant.
Insight
The most common mistake in business lending is choosing the facility before defining the need. A term loan used for a short-term cash cycle creates pressure; an overdraft used to fund a long-term asset creates fragility.