The WoW Style

Owning a business involves having to juggle many different things every day. Whilst thinking about sales, staff morale and much more, finances are one of the biggest considerations entrepreneurs will be concerned with. After all, the financial aspect is what keeps the business going, so when cash flow is low or you have investment plans to propel your business, funding is vital. Here’s our quick guide to 4 things every business owner should know about lending.

• It’s Not Guaranteed

It can be easy to think if you have good credit and a successful business that you should always get credit when you need it. However, no lender will provide a guarantee you will be approved, even if you have borrowed from them in the past. Credit and affordability checks will be performed each time you apply and the reason for this is to ensure nothing has changed in your circumstances. Whether you need short term loans to cover an unexpected expense or require something larger for a long term investment, you will still need to ensure you have the affordability. As no loan is guaranteed, you will need to make sure you have an alternative option just in case you are declined.

• Not all Lenders are Trusted Sources

With many lenders to choose from, you’d be mistaken for assuming they are all working within responsible lending guidelines. Set out by the Financial Conduct Authority (FCA), these regulations ensure that lenders are treating borrowers fairly and are not overcharging for their services. The easiest way to work out if a lender is a trusted source is to check whether they appear on the FCA register. All approved lenders will have an authorisation number and they should have this published on their website. If you can’t find this, look up their name on the register to be sure.

• Don’t Take on More than You Can Afford

Taking on too large an amount from a loan can mean potentially struggling to maintain the repayments. Whilst lenders will have a maximum they can lend, this doesn’t mean you should apply for the maximum amount. If you only require a certain amount, it is better to apply for the exact loan amount you need rather than a larger figure. This will ensure your repayments are as low as they can be and that you can maintain them. It can be very tempting to borrow more than you planned to, but committing to a large loan that you could potentially have for years needs careful consideration.

• You May Need to Provide Collateral 

Some lenders may only provide larger loan amounts if you provide the collateral to secure it. These are secured loans that when you apply you will need to define an asset of value that you want to use to guarantee the loan. This type of agreement isn’t ideal for everyone and may see you secure your car, property, or other valuables just to get the money you need. In the same way a mortgage is secured against your home, secured borrowing has added risk if you fail to maintain the repayments. Your assets could be used to repay the loan if you fall into financial difficulty, so this type of loan should be taken lightly. If it allows your business to secure higher funding, this may be a risk you are willing to take, but you should also consider other avenues to raise funds first.

Whilst this list is not exhaustive, it will help provide direction when thinking about taking on further lending. As long as you can afford it and you have a need for more funding, the loan you choose could turn out to be the perfect springboard to future success.