"ARE YOU A HOMEOWNER?”
It’s a common question that comes up when applying for business funding and especially business loans.
For good reason though, and it’s possibly not as daunting a question as you may think. Finance for non-homeowners is often still available for directors who aren’t UK homeowners or don’t want to provide a personal guarantee.
So, the simple answer is - No, BUT it can help AND depends on what the funding is for, as another product may be more suitable e.g. asset finance, refinance or invoice finance.
During the process of applying for a business loan, there's a certain amount of information we (as a broker) need to supply to our lenders, in order to accurately portray your business. We also need this information to be able to match you to the best possible lender for your situation and requirements.
WHY DO LENDERS PREFER HOMEOWNERS?
As most finance products require security to help minimise the risk for the lender, it's often a requirement that a check is done on the Company Directors. This gives the lender a good idea about you and your business – if you have a good history of directorship then this shouldn’t be a problem for you.
For loans deemed as higher-risk, or harder to secure, lenders will often use personal guarantees which look at you as an individual as a way of securing the loan. Being a homeowner in these circumstances means that you'll have had a significant amount of checks performed on you already, and therefore would have a higher probability of meeting lender criteria.
This is a question that is very commonly asked by both lenders and brokers. Despite popular belief, this is usually not asked with the intention of making your home as security for a loan. Remember to keep your eyes open and always ask questions when this comes up during future finance applications.
80+ LENDERS, MORE OPTIONS:
We're seeing more and more appetite to lend to what traditional lenders might deem as ‘risky’ businesses and sectors. Our 80+ strong lending panel are creating alternative finance products that use different forms of security which is is great news for small, growing businesses.
For those businesses who’ve been rejected in the past, there could still be hope, our panel of lenders spend more time analysing the business and are motivated to find a product that suits your needs.
CAN SOMETHING ELSE BE CONSIDERED FOR SECURITY?
This depends on what you need and the state of your business as a whole, and it's probably worth speaking to our finance brokers at Approved Business Finance - who can guide you in the right direction. For example, if the funds you need are allocated to a piece of equipment you need, asset (equipment) finance is a more suitable option and also has tax benefits. You could also consider refinancing if you already own assets.
What is always advantageous is a strong asset in the background or an established trading history as well as a balance sheet. These factors will all work in your favour when we approach lenders, whatever the finance product is, by lowering their risk — in turn giving them the confidence to finance your business without added security.
A list of positives for these lenders include:
At least a static turnover
Good invoice finance debtors
Obtaining finance without a personal guarantee is a complex process, and if you don’t fully understand if you’re getting the right deal, the best option for you would be to speak to our finance brokers at Approved Business Finance. The reason behind this is that brokers (like Approved Business Finance) have access to a wide array of lenders (in this case, and 80+ strong panel) and can focus on the best-suited match for your business.