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Debt finance
Loans | Credit Facilities | Credit Cards
Loans
Secured vs unsecured
Unsecured Company loans don't require company assets as security but may require personal guarantees from Directors of the business. Secured company loans (such as mortgages) are secured on business assets, which are at risk if the company defaults on payment.
Loan aggregators (marketplace lenders)
Rather than applying with multiple parties, there are loan aggregators where you only need to make one application to access multiple lenders. These include:
Information required by lender
Type
Information
Notes
Admin
6
Last full filed accounts with Companies House
looking for overall position and performance
Most recent set of management accounts
looking for overall position and performance
6 months of bank statements
looking for whether cash is declining in the business and any other flags
Copies of past year VAT Returns
looking for corroboration of management accounts information
Director's statement of personal assets and liabilities
where a personal guarantee is needed
Cost commitments over the next 12 months.
looking for large commitments or obligations that the company has to pay
Metrics
2
EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) for the 12 months ending 31 December 2019, to assess viability.
looking for +ve trends
Coverage Ratio (12 months EBITDA divided by 12 months of capital and interest repayments) must be at least 1.0x
looking for 1.5x-1.75x
Credit Facilities
Revolving credit facilities
Revolving credit facilities act in many ways like an overdraft. Loan aggregators (listed above) provide these in addition to loan facilities and can be useful short-term solutions where cashflow is tight.
Note: this is generally not a good form of capital for long-term use as rates can be extortionate.
Overdrafts
Overdrafts can be arranged with you business
but generally they only often small facilities and fees for going over limits or late payments can be exceptionally high.Note: this is generally not a good form of capital for long-term use as rates can be extortionate.
Credit Cards
Credit cards can help spread the cost of large purchases and provide some help to short-term cashflow issues. Fees can be high and not many suppliers will accept payment via credit card.
Note: this is generally not a good form of capital for long-term use as rates can be extortionate.
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