In his latest newsletter, Mark Smillie offers some simple steps to keep in mind to help your business get the best rates possible! If you’re interested in recieving Mark’s newsletter directly to your inbox, consider signing up here!
I often get asked, “What can I do to get the best Interest Rate?”
I reply (in my mind) use someone who has been doing this for over 20 years! Recently, I was at a house build recently and the plastering work was amazing. I did not ask the person if he could give me a quick tip which would allow me to achieve the same result as him.
However, this should help.
By following these 2 simple steps, you should pay less for your business finance and not go through unnecessary stress disappointment and having your valuable time wasted.
Most finance companies have a variety of ways to assess, how much, they can lend a business and at what interest rate.
Don’t leave applying for finance to the last moment or until you really need the funds.
Take this recent case.
A client rings me, he has been receiving my weekly emails for years and says “Hey Mark, I have a major client who I can’t get credit insurance with and my book debt finance company will not give me the advances that we expected.
We have similar cases about every 2-3 weeks, the reason changes, it could be we have a new order that needs funding- clients our slow in paying- seasonal business slump.
This client says can you arrange a £100k loan, sure I say no problem and it isn’t.
But they have not sent through the paperwork yet and it is easy standard stuff.
Experience tells me, they will probably leave it for another couple of weeks. They know in their hearts they will need the funds, but they can get by for now, so it gets put on the back burner
So, what? You might say, it’s up to them, sure it is but, I am afraid it is going to cost them.
Apart from your accounts and a credit search most finance companies pay close attention to your last 9 (pre Covid it was 3 months) months bank statements (some high-tech computer programs get involved in this).
They will sense/predict that your cashflow situation is on a downward trend.
And 1 of 3 things will happen, sure as night follows day.
- The interest charges you will be offered will be higher than it would have been, and this will be compounded every week it is left, the computer algorithm between this week’s cashflow and what it was 12 weeks ago will be different, it will sense more strain on the cashflow.
Instead of paying 5% interest, it could go to 8-14%, just by waiting a few weeks.
- This could prompt the finance company to ask for further information, which normally pre-empts a reduced loan offer, a higher interest charge or rejection. Whereas it would have sailed through a few weeks ago.
- At the last minute in underwriting, the day you are expecting funds, your company could receive a call from the finance company (completely out of the blue) just asking 1 easy question, get this wrong and the expected funds will not arrive.
However if you have access to a senior “Can Do” executive at the finance company, like we do, we can explain at day one why financing you is a good bet. E.G. The funds are be used to finance new work etc.
Don’t apply to several finance companies seeking the best rate.
What is the harm of applying to as many finance companies as possible, surely, I will get the best deal?
At the last moment in Underwriting they will see that several “financial footprints” have been made by the business, and think;
- Are they wasting my time? Which could lead to a turndown or a higher interest rate.
- They must be desperate.
- Underwriters do regularly speak to each other, to find out whether the client is a time waster or a potential problem later.
- The Underwriter might think, what happens if there is a problem with this loan, and my boss asks me, why I approved it when it had gone to other lenders?
Well that’s it for another week, I do hope this post might save you some stress and money.
Why put yourself under extra pressure, you do your job and let me do mine, that way we will both do what we are best at.
If you are looking for any type of business finance, please feel free to contact me on my mobile which is 07710 466166 or call the office on 0800 612 5364.
I have been doing this for over 25 years and have many decision makers that I can talk to, who have a can-do attitude.
Please feel free to pick up the phone and call me.
I wish you Health, Happiness and great Success
Mark