If you’ve been turned down by a bank for a business loan in the past, here are five steps to ensuring you get the green light next time around.

Find out why

There are a whole host of reasons why a bank might not be willing to commit to a commercial loan: cash-flow issues, a lack of collateral or reasons entirely unrelated to your business itself, such as a risky market or an unfavourable current climate. When the bank informs you your application has been rejected, it’s unlikely they’ll elaborate on why – so be sure to ask them and get to the bottom of the matter.

Check your credit rating

One of the biggest reasons why a bank might not approve a commercial loan not mentioned above is a poor credit rating. Even if your business has a respectable rating, if your own personal one is lagging behind, it could affect your application. Request a credit report, look into and chase up any discrepancies and do your utmost to improve that figure going forwards, by paying off bills, credit cards and other outstanding debts on time.

Look into alternative options

A traditional loan might be the most well-trodden route to financing your company’s launch or expansion, but it’s not the only path open to you. Do your research and investigate the possibility of attracting funding via other means, such as the money-generating practice of invoice factoring or the increasingly-popular phenomenon of crowdfunding.

Consider your own assets

If you aren’t prepared to put up your own assets (such as a house or car) as collateral for your loan, you’re betraying a lack of faith in your own vision. If you don’t believe your project can succeed, why should a bank? Look carefully at what you own and evaluate the risks and benefits of introducing your assets into your next commercial loan application. It could make all the difference.

Don’t bank on the banks

The banking industry isn’t the be-all and end-all when it comes to securing a commercial loan to bolster your business. Consider enlisting the help of a commercial finance broker, who have the knowledge, expertise and experience to assess all of the options open to you and find the source of funding most appropriate for your unique situation.

The post I’ve Been Rejected for a Commercial Loan… What Next? appeared first on Genie Lending: Business Loan Alternative Finance Specialists.

The conventional banking system simply isn’t working for most of us. Without alternative finance providers offering solutions such as peer-to-peer lending, crowdfunding and asset finance, most businesses wouldn’t be here today. These alternative finance specialists are plugging the gap the banks can’t fill, and giving a boost to the economy.

The problem with banks

Why is it so much harder to get a business loan from the high street these days? Financial crashes and economic uncertainty has led to most traditional banks being extremely cautious about lending. The terms on which businesses can secure credit from financial institutions are becoming increasingly unfavourable, so only the biggest and most established companies are approved. This creates a huge problem for start-ups and SMEs, who can’t get their businesses off the ground without a cash injection from the beginning.

In addition, lending from the big banks is also very expensive. The cost of borrowing – if you actually pass the application stage – could make it difficult to repay in the future.

The Alternative Finance option

Thankfully, if you’ve been rejected by traditional financial institutions then there is a way to beat the banks. There are now a wide range of funding sources to explore, allowing entrepreneurs to finance their great ideas. While the banks have been busy failing to give credit to small businesses, private investors and finance experts have seized the opportunity to offer alternative finance solutions. You can lend the same amount of money as you would from a bank using these different methods.

P2P/ Crowdfunding

Peer to peer lending is basically borrowing money off individual investors rather than a financial institution. Crowdfunding usually involves a number of investors. This type of lending is suitable for all types of businesses and is much easier to secure than a bank loan.

Asset Finance

If you have a fledgling business which needs expensive machinery or equipment in order to grow, asset finance could be the solution. It allows you to spread to upfront cost of the equipment over time, so you don’t need to worry about finding large amounts of money for necessary business assets.

Want to find out more about how businesses are beating the big banks? Take a look at Genie Lending’s case studies.

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There’s a number of factors which have contributed to the boom of alternative finance solutions, such as peer to peer lending and crowdfunding. The uncertain global economic market has definitely played a part, as the recession impacted banks and traditional lenders. Also, consumers and now much more comfortable using the internet to apply for loans and transfer money, which opens up a wealth of opportunity for the financial sector.

Discovering Crowdfunding and P2P Lending?

They are often grouped together but there is a distinct difference between crowdfunding platforms and peer to peer lending. In both cases, it is usually a number of investors who will contribute to the amount you borrow.

P2P is very similar to a business loan from a bank, except that you’re borrowing off real people. You’ll pay back interest to your investors in return for the borrowed finance, and it’s a flexible way for companies to receive a fast cash injection.

Crowdfunding is different because you will receive money from a group of individuals or organisations to make up the amount you require. You will then need to offer your backers some sort of reward – for start-ups this could be a perk such as a discount or free product. Alternatively, if you’re looking for big investors then you may need to offer equity in your business or a profit share – think of Dragon’s Den.

Usually, crowdfunding is a great option for entrepreneurs and start-ups while peer to peer lending is more suited to established businesses.

Why are they so Popular?

These types of alternative finance are now mainstream because it is so difficult to get a traditional business loan from a bank. Lending has decreased for years now, making it impossible for people to get their business ideas off the ground. Without personal investment, entrepreneurs are left with no choice but to pitch their idea online to investors. Even established businesses with a strong trading history can struggle to be accepted for financial help from a bank.

Another reason why peer to peer lending is attractive is the generally low interest rates. If you apply for P2P through a financial broker, they will look at all offers and all interest rates and offer an average interest rate. Larger financial institutions have less competition so don’t offer the best deal.

Ready to see what all the fuss is about? Contact us to find out more about P2P or crowdfunding.

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Peer to peer lending platforms hit the financial market about a decade ago – but there are still many Brits who have never heard of it or don’t understand how this type of borrowing works. Alternative finance solutions such as crowdfunding and peer to peer lending can help businesses access cash which wouldn’t be available to them from a bank, and is also a way for investors to get a healthy return. Peer to peer lending schemes can also be used for personal borrowing, to fund debt consolidation or home improvements for example.

Because this is so far away from traditional lending, it can be difficult to understand. Genie Lending’s peer to peer specialists explain below everything you need to know about peer to peer lending.

There was once a time when banks were the only option for businesses, property investors and individuals – but now there is a safe and fast way to secure funding for any project.

What is Peer to Peer Lending (P2P)?

If you take out a loan from a bank, you are lending money from that financial institution. If you us apeer to peer scheme, you are lending money from people instead. That is the vital difference between peer to peer lending and traditional bank lending. The people involved in the transaction are unknown, and borrowers have to go through peer to peer lending companies such as Genie Lending.

Why is it Popular?

As banks in the past years have been cracking down on lending, many businesses simply don’t bother applying for loans anymore. Now there have a legitimate alternative in peer to peer funding, which actually offers many more benefits than a bank loan. Both lenders and borrowers stand to benefit from peer to peer lending, which is why it is an attractive solution for the market itself.

Here are some of the main advantages of peer to peer funding:

• You are much more likely to get accepted for credit
• You don’t have to go through a bank and deal with a difficult application
• Much faster access to the cash than with a bank application and approve process
• It offers more competitive rates, due to less infrastructure and administration
• It is protected by government legislation since 2014

Growth of P2P Lending

The peer to peer lending sector has recorded huge growth over the past five years – and with Brexit putting even more uncertainty on the economy and the high street banks, it looks set to continue growing. P2P is becoming a mainstream funding solution, with the market providing over £5bn in loans in the second quarter of 2016 alone, according to data from the peer to peer finance association. With so many individuals and businesses benefiting from this fresh way of lending, there is no need to despair at your declined bank loan letter.

Who am I borrowing off?

The main distinction between this type of lending from others, is that you’re borrowing money off money rather than a financial institution. A group of small investors will lend you the money instead of the bank, and you’ll still have to pay an interest rate when repaying it. Typically borrowers will pay less interest than a traditional bank loan, and lenders get more interest than they would if they had cash sat in a savings account. This is why peer to peer lending has been so successful – it has advantages for both sides.

To access peer to peer lending, you will need to contact a specialist broker or join up to online funding websites. These will help match borrowers with lenders and arrange a peer to peer loan on your behalf.

What is the difference between peer to peer lending and a bank loan?

First of all, it is much easier to access finance through peer to peer lending than get approved for a traditional high street bank loan. Secondly, you should understand that you are lending off individuals rather than a financial institution, and because of this fact you are likely to pay less interest on the loan.

Is it safe?

From a borrower’s point of view, it is just as safe lending from peer to peer platforms as it is from a bank. The risk is on the side of the investors, as they can’t be certain you will make all the repayments. However, the peer to peer lending industry has gone from strength to strength. One of the biggest players, Funding Circle, lends £65.4 million a month around the world. The sector has also been regulated by the Financial Conduct Authority since 2014 to ensure best practices by alternative finance providers.

Find out more about peer to peer lending on our website or by calling us for advice.

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1. Borrowing from a family member

If you have a relative with some spare cash in the bank, and they have offered to lend you money to fund your business, then this could be a favourable option. Of course you will bypass the long application process and will probably have little or no interest to pay back. However, consider the implications if you can’t repay the loan, and how it could affect your personal relationship.

2. Peer to Peer loan

Rather than turning to a bank for a business loan, you could borrow from a private lender. The internet has made this more accessible, with online platforms providing borrowers with a range of affordable options. You might not be able to take out this type of loan if you’re not already trading, however crowdfunding platforms are often willing to fund start-ups.

3. Government start-up loan

If you’re launching a new company, then you may eligible for a start-up loan from the government. They offer an unsecured loan with a low interest rate, so it’s definitely worth looking at this option before shopping around for other business finance.

4. Asset finance

If you’re already an established business, then you could be able to borrow large sums of money against your assets. This means that you can get funding which is secured against your business assets such as vehicles or machinery. You can then use the cash where you need it most, such as replacing equipment or improving cash flow.

5. Angel investors

If you are prepared to give up a share in your business, then the angel investor route may be for you. Think of it as Dragon’s Den – you’ll have to create a pitch and encourage investors to believe in your business and its future. Many angels are entrepreneurs themselves so understand what you’re going through. If you don’t have good credit or have any assets to secure a loan, you may want to offer a percentage of the business instead.

Need to chat to a professional about business finance? Contact our friendly team today to discuss your options.

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Personal Loan

A personal loan is usually unsecured, and is available from most high street banks. The amount you can borrow will depend on your credit history and many banks will now also check your income to see if you can comfortably afford the repayments. Interest rates on personal loans can be remarkably high, which makes them unsuitable if you only need to borrow a small amount of money, or if you plan on paying it back at a later stage.

If you are thinking of borrowing money to invest in property or a renovation, you may like to consider bridging finance instead. It’s a lot easier to be approved for this type of finance, regardless of your circumstances or credit score – however you do need to own a property and this is offered as security to a lender. This is a short term finance solution available to individuals or limited companies.

Business Loan

As the name suggests, this type of loan is for businesses or entrepreneurs setting up a new business. You could need extra capital to invest in stock or machinery, or perhaps renovate a property or expand. Being approved for a business loan from a bank is becoming more and more difficult, but there are alternative finance options available.

Crowdfunding

Rather than borrow from one strict financial institution (a regular bank) you now have the option to lend money from a group of small investors. This lowers the risk for the lenders as they aren’t lending the full amount alone. To qualify for this type of peer to peer lending, you usually need to own a profitable business with good records, but you can choose from a secured or unsecured loan.

Buy to Let Funding

If the reason you’re looking for finance is to buy a property to let, then there are tailored financial solutions for this situation. A buy to let bank mortgage may not be appropriate, but you could benefit from buy to let funding from premium lenders. This is the same as a long term commercial mortgage, but without the application hassle you’d experience at a high street bank.

Have you found the best loan for your circumstances? Get in touch with our financial experts at Genie Lending who can advise further.

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