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Contractor Mortgages – Top Tips From Our Experts And Lenders

Thinking of applying for a contractor mortgage? Improve your chances of getting approved with these tips from our in-house experts and panel lenders.

Contractors and freelancers have always had to struggle in order to find a lender who would agree to the terms. This took a turn for the worse in the aftermath of the 2008 global recession.

If you’re a contractor, you would know that banks and high street lenders don’t really have a positive track record of accepting contractor mortgage applications. That, however, does not mean that contractors, freelancers and other self-employed professionals cannot get a mortgage to finance the purchase of their dream home. Here are some important tips from our in-house contractor mortgage experts and specialist lenders on our panel to help you understand contractor mortgages better and in turn be well prepared before applying for one.

Do You Qualify For A Contractor Mortgage?

As far as contractor mortgages go, the first sign of confusion arises from the very question of eligibility.

The problem here is that many contractors learn about contractor mortgages after their applications are turned down for regular mortgage products. At this point, it should be enough to say that all contractors, freelancers and self-employed professionals who have ongoing, active contracts are eligible to apply for contractor mortgages.

Examples

Most lenders are happy to bracket all contractors in a single group for the sake of simplicity, with sub-groups corresponding to various industries and sectors. For example, we have on our panel lenders who specialise in IT contractor mortgages, home services contractor mortgages and so forth.

Directors of limited companies who act as independent contractors (or employed contractors with longer contract tenures) and self-employed professionals/freelancers (registered as sole traders) are, for instance, eligible for contractor mortgages.

How Contractor Mortgages Differ From Other Mortgages

Contractor mortgages are fundamentally no different. They allow the borrower to borrow the money from the lender over a long period of time, while the property in question acts as the security.

The difference stems only from the fact that contractor mortgages are customised to meet the peculiar financial position contractors find themselves in. You may have noticed that it’s difficult to get your application through if you can’t demonstrate a reliable stream of income – a huge problem.

As a way of solving this problem, lenders are willing to undertake additional risk by disbursing contractor mortgages. This risk often manifests itself in two forms – relatively higher deposit amounts and interest rates. This is, however, not to say that contractor mortgages are always more expensive than other mortgage products and contractors, essentially speaking, are forced to accept a rough deal. Read on to understand what we mean by this.

Contractor Mortgages And High Street Lenders – A Bad Combination

At Commercial Finance Network, we broker a range of contractor mortgages for our customers on a regular basis. Over the years, we’ve observed a common thread that runs across many applications we receive – applicants choose to approach us (the broker) only upon getting turned down by high street lenders.

Our experience of operating in this industry for over a decade tells us that approaching high street lenders for any specialty finance product – contractor mortgages, HMO finance or even invoice finance – is a bad move. Most high street lenders lack the resources or experience to handle any case that doesn’t conform to the norm, and hence, you are very likely to receive an expensive offer (if at all you’re to receive one, that is).

In essence, if you’re looking for a contractor mortgage, high street lenders will have little to offer.

What do you do then?

Approach Specialist Lenders

Specialist lenders are the ones who bring on board adequate experience and expertise to handle your exact requirements. In this case, a specialist contractor mortgage lender will know how to assess your credit history, your history of contracts, your ongoing contracts and your affordability, putting them in a better position to construct a mortgage offer that takes into account all the angles.

 Of course, it’s extremely difficult to approach specialist lenders on your own if you don’t have the right contacts. This is where a leading whole of market broker like Commercial Finance Network comes in. We forward your application to our panel of UK-wide specialist lenders, thereby improving your chances of securing a fair, affordable and swift contractor mortgage offer. Applying is easy – call us on 03303 112 646 or fill in this quick application form.

Yes, New Contractors Can Indeed Get Contractor Mortgages!

It’s one of the long-floating contractor mortgage myths – if you are a new contractor, the doors are already closed on you.

This is, we’re happy to report, far from the reality.

One of the benefits of working with an industry-leading broker like Commercial Finance Network is that your application reaches contractor-friendly lenders who are willing to assess your case even when you are a new contractor. Of course, it’s always a good thing if you have been operating as a contractor for 2-3 years.

However, it’s advisable to have an ongoing contract that the lenders can use to annualise your day rate (the longer the contract, the better deal you’re likely to get).

What Are Annualised Contractor Day Rates?

If you currently have an active contract and are paid a fixed day rate, lenders may be willing to annualise this rate to arrive at an estimate that fairly reflects your yearly income.

However, we would like to inform our readers that not all lenders follow this practice, and the ones who do may require you to have a long term contract in place. If you have an active contract for the next 12 months, your chances of getting a good contractor mortgage offer automatically receive a boost.

How Do Lenders Calculate Annualised Day Rates?

It’s a straightforward process that involves a couple of assumptions. It may, however, vary from one lender to another.

If you are a contractor whose contract stipulates a flat day rate of £300 and you offer your services 5 days a week, your weekly income comes to be £1,500. Discounting the holidays, it’s safe to say that most workers get paid for 43-48 weeks a year.

Assuming that you work for 48 weeks over a 12-month contract term, your annualised day rate will be £72,000. The lender will then be able to calculate your affordability based on this number.

Making The Most Of Your Company Account

This is a question we get asked often – Can I utilise the cash surplus in my company account towards my contractor mortgage?

There’s no objective answer to this question, and we strongly recommend consulting with qualified finance experts. However, as a rule of thumb, we can safely say that you can produce company accounts (for a limited company, that is) to bolster your mortgage case. Lenders will always be better placed to offer you a good deal if you can convince them that you’re running a profitable company and you aren’t drawing high salaries for reasons such as tax concessions.

On the other hand, if you’re merely working as a sole trader or in a partnership, you may be able to use company accounts to offset the deposit/repayments on your contractor mortgage.

This Goes Without Saying: Keep Your Credit History Clean!

The most common reason for lenders to turn down contractor mortgage applications are unconvincing credit reports.

We understand that personal situations and other financial difficulties can damage your credit score (it’s a very common scenario, and you shouldn’t feel disheartened about it). However, you should take positive steps to repairing your credit score and sorting out your credit history as soon as you can. Working consistently towards this goal – paying bills, clearing the past dues, settling outstanding debts, getting rid of unwanted credit cards are a few steps you can take in this regard – usually does the trick.

To know about the common scenarios that hurt your credit score, do read through our bad credit mortgage guide.

Contracting Breaks May Hurt Your Application

One of the very first points we made here was that you should avoid high street lenders for specialty products like contractor and freelancer mortgages. Here’s another reason that supports this point: high street lenders are almost always ill-prepared to understand your contracting situation.

Most people choose to start working as a contractor or a freelancer to embrace a certain lifestyle – one that lets them have a better control over their lives. After all, who wouldn’t want such professional and personal freedom?

This, however, comes with its own risks. Every contractor knows that it’s not always easy to bag contracts that run into years. Applying for a new contract, going through the whole process and essentially setting up a new shop every few months naturally leads to contracting breaks.

These breaks, even when they are intentional, don’t do you much good when you’re applying for a contractor mortgage. Therefore, we advise you to avoid letting such breaks creep in. Your focus should be on establishing an unbroken, continuous history of contracting (which, in all probability, will also help your finances). For reference, many lenders on our specialist panel prefer that you don’t have contracting breaks that are longer than 8 weeks over a 12-month period.

Contractor Mortgage Deposits

As a rule of thumb, lenders can offer better quotes when you are ready to put down a bigger deposit. As the deposit amount goes up, the lender’s risk goes down, and you may get interest rates that are much lower than ongoing market rates.

Generally speaking, contractor or freelancer mortgages do require you to put up a 10% (or higher) deposit. If you can produce a good track record of contracting, healthy affordability and good credit score, this number may go down (subject to the lender’s discretion and policies).

Know And Understand The Charges Involved

As a responsible, industry-leading mortgage broker, we will always keep you in the loop regarding our fees and charges. But that isn’t it – the lender will charge you an additional set of charges. These include:

  • Arrangement fees
  • Admin charges
  • Stamp duty
  • Property valuation charges
  • And others

The Best Contractor Mortgage Is The One That Fits Your Needs

Applying for a mortgage without having the luxury of predictable income under your belt can be stressful. Being turned down by multiple lenders doesn’t help at all in such a scenario.

Thankfully, you can now bypass all the hassle by reaching out to specialist lenders across the UK using our affordable, flexible and fast contractor mortgage broking services. Remember – a good mortgage deal can save you thousands of pounds in the long run.

To speak with one of our Contractor Mortgage Specialists now, call us on 03303 112 646. You can also fill in this simple form to get started.

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What Is Equity Release And How Does It Work? – Important Equity Release Tips

If you’re looking to get your hands on cash to fund your lifestyle after 55, equity release can be one of the options you may want to consider. Like all finance products, equity release comes with its positives and negatives – and that’s exactly what we’ll discuss in this handy, simple guide to understanding equity release, along with useful tips from our experts.

Planning for your retirement can be a seriously daunting task – so much so that a significant share of Britons never gets around to doing it. But that’s not it. More often than not, your savings, investments and retirement funds, even when put together, may just fall short being enough to fund your lifestyle.

On average, UK seniors need £27,000 or more to lead a comfortable lifestyle. Given the ever-increasing costs of healthcare and leisure, it’s safe to assume that this number will go up faster than most retirees and seniors can catch up with. This – despite the fact that many seniors strive to save a good deal of money each year – is a sign of worry. In fact, in April 2019, the UK households, companies and the government all went in deficit together – something that’s never happened before.

If you find yourself in a situation where you need more cash to meet the monthly requirements, the obvious choice will be to downsize. If you don’t want to downsize, equity release can be a viable alternative – provided that you know what it is, how it works and what the potential downsides of getting into such a contract can be.

What Is Equity Release?

Equity release is a way of freeing up the value of your home without having to move. By and large, it’s a fairly simple concept – you give up partial/full equity and you get cash in return as a lumpsum or in monthly instalments.

Equity release allows you to forgo the inconvenience/inability to move. But keep in mind: you’ll need to understand the finer details.

Equity Release: Key Points

  • The cash you’ll get upon releasing the equity will be tax free. You’ll be free to utilise it as you want to.
  • Equity release options are available to homeowners who are 55 years of age, or older. Home reversion plans are available to seniors who are 65 years of age or older.

Our equity release mortgage brokerage guide discusses these points – along with various types of equity release – in greater details.

Let’s now move on to discussing a few important equity release tips from our in-house experts, lenders and industry specialists.

1. Weigh Other Options First

Equity release, at the end of the day, is a mortgage you raise by keeping as security your share in your home. So, as is the case with all other mortgages, it’s advisable that you are aware of your other options.

The most obvious one would be downsizing. If you’re in good health and have no trouble making the move, downsizing can save you a great deal of money. It can not only unlock the full market value of your home, but it’ll also allow you to cut down on future maintenance expenses and higher property taxes. If not, you can think about renting a portion of your house or converting it into an HMO (this will, of course, need investment). If you want to learn more about how HMOs work, do go through our HMO finance explainer

In addition, you should explore options like utilising your savings and investments, if that makes financial sense in the longer run. 

2. Understand And Be Aware Of Your Monthly Expenses

Later life care is a sensitive issue, and yet very few people try to address it head-on. The first rule of successful money management is to be aware of your expenses. So, before you decide that equity release is the way you want to go, you need to be very sure of how much is needed to fund your lifestyle including leisure and luxury.

Some important aspects are non-negotiable. For example, if you need to plan for home care, you need to take into account the fact that home care professionals can charge you up to £30 per hour. In addition, if you wish to fulfil your travel/vacation goals, you’ll want to have at your disposal upwards of £5,000 in free cash each year.

This is just to show that when you calculate all your expenses correctly – with enough leeway for miscellaneous and incidental outgoings – you will be in a better position to decide whether you need to release equity at all (and how much, if you need to).

Important – Equity Release May Affect Certain Benefits

Since equity release concerns homeowners aged 55 or more, it’s important to consider its impact on some of the benefits you may be receiving.

Going ahead with equity release means that there is a significant change in your affordability. With free cash lying in your bank (or a monthly stream of income guaranteed over a period of time), your finances assume a whole new shape. What this means is that there is a possibility of this having a direct impact on means-tested benefits you are presently entitled to receiving.

Understanding What Means-Tested Benefits Are

Means-tested benefits, in the simplest of terms, are the benefits you receive as a result of being in a certain financial position of advantage/disadvantage.

For example, couples whose weekly income is lower than the present benchmark of £255.25 may receive Pension Credit (a means-tested benefit). 

Which Benefits Does Equity Release Impact?

In most cases, we’ve observed that equity release impacts Pension Credit and Council Tax Reduction.

As we stated in the earlier point, if releasing equity moves your weekly income above the benchmark, your Pension Credit benefit may get affected. Similarly, Council Tax Reduction presently allows pensioners with capital smaller than £16,000 certain tax concessions. These may no longer be applicable if releasing equity takes your capital over £16,000.

Calculate The Cost Of Your Equity Release Mortgage Beforehand

We mentioned earlier that every qualified broker will provide you with a detailed breakdown of their fees and commissions. These will be the upfront and one-off costs of releasing your equity. The long-term costs will, however, be determined by the type of equity release you choose and the interest rate on offer.

Typically, equity release mortgages are more expensive than regular mortgages. For example, our lenders can offer you equity release quotes with interests rates up to or lower than 5% (a representative number).

Let’s assume that you’re 60, your property is worth £150,000 and you want to release a third of your equity to convert it into a lifetime mortgage worth £50,000 (the one that will last your lifetime).

Assuming that the lender charges you interest at 5% per year, here’s what the breakdown of costs will look like over the next 15 years.

As you can notice, in this case, the principal doubles roughly every 14 years. That, indeed, is a steep climb when compared to regular mortgages. This aspect of equity release should be given due attention when you’re applying for equity release offers.

Additional Costs You Should Expect

Keeping aside the brokerage and commission, you will need to arrange for additional arrangement costs.

These usually vary from one case to another, and the typical ones include solicitor fees, valuation fees, administration charges – not to mention the stamp duty on the agreement. Many lenders offer to pay for these costs by making necessary deductions from your mortgage principal.

How Much Should You Borrow?

This, of course, is your call. Lenders on our panel offer both lifetime mortgage and home reversion plans that can be customised to fit your requirements. That, however, really isn’t the issue here.

It’s essential to understand here that – thanks to relatively higher interest rates – equity release mortgages become more expensive over time. The longer you borrow for, the more you’ll pay – it’s as simple as that.

Hence, it’s advisable that you borrow only the amount that you really need and think is adequate to see you through. If you can compartmentalise your requirements, you’ll know what the pressing needs are.

You can always release more equity at a later date or consider structuring a drawdown lifetime mortgage plan that allows you to draw cash from your equity as and when you need to.

A Lump Sum Or Monthly Income?

This is another important consideration.

Most lenders are happy to let you decide the mode. A lump sum allows you to take care of major expenses right away (think medical/care bills, other unpaid bills, outstanding loan/mortgage payments, gifting money to your loved ones or buying a new car). You can also choose to use this cash to finance your vacations and other leisure activities.

On the other hand, monthly income makes sure that you’ll have a reliable, guaranteed stream of income to take care of your regular expenses each month.

At the end of the day, it all boils down to what your requirements are and how you want to go about spending your money.

Can You Make Monthly Repayments?

An average equity release case will go through the borrower’s lifetime without any monthly repayment being made. This is the most convenient and common mode of operation for equity release products.

However, some lenders may allow you to make monthly repayments towards the interest. This means that you keep the mortgage active by repaying the monthly interest and making sure that – in the long run – the mortgage turns out to be much cheaper.

This is better explained with an example. We’ll carry forward the same numbers from our previous example.

We saw that over ten years, including the compounded interest, the mortgage value will swell to £81,444 from £50,000. In other words, the cost of mortgage will turn out to be £31,444 over ten years.

If you, however, were to pay the interest off each month, the same cost will come down to £25,000.

Will You Be Able To Leave An Inheritance?

It’s a question that’s very important to many borrowers. If you want to pass your assets on to your loved ones, you’ll need to understand that releasing equity means that there’ll be lesser value for them to inherit.

If you want to make sure that you leave a certain amount as inheritance, you can make necessary arrangements by adding an inheritance protection clause to your equity release plan. This may, however, bring down the mortgage principal.

Can You Transfer The Equity Release Plan?

Despite releasing equity, many borrowers feel the need to downsize anyway. Such a scenario warrants an important question – can you transfer an equity release agreement from one property to another?

The answer depends entirely on the lender’s policies and the terms of agreement. It’s best to have this aspect settled while drawing up the equity release plan.

Assess The Property Market

Since every equity release plan is essentially tied to the market value of your home, the overall property market plays an important role in how much you’ll have to pay back.

If the market value of your property goes down, you’ll owe much more to the lender. This, however, only applies for lifetimes equity release mortgages. Home reversion plans make your position more or less immune from market ups and downs.

With Caution And Care, You Can Make Equity Release Work!

Releasing equity is an important decision and should be taken with due deliberation and care. You may contact the Equity Release Council for in-depth information about equity release products.

At Commercial Finance Network, we accept equity release mortgage applications from homeowners across the UK. Fast decisions, industry-leading practices and an eclectic panel of specialist lenders mean that our equity release brokerage services bring you immense value.

To request a call back from our team of equity release experts, call us on 03303 112 646 or drop us a line here.

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Got Bad Credit? Follow These Adverse Credit Mortgages Tips From Our Experts

It’s bad enough to have bad credit – don’t make it worse. Take the right steps today and boost your chances of getting approved for an adverse credit mortgage from our panel of specialist lenders.

Managing your expenses is an art. It’s never too easy to keep doing all the right things when it comes to spending, saving and investing your income. However, we have spotted a few worrying trends over the last couple of years, and that – more than anything else – is the reason we decided to ask our experts for some tips.

Average UK household debt – as per the latest available figures – stands at over £15,400. A huge chunk of this is made up of unpaid credit card bills. The use of credit cards has increased consistently across the world, and Britons aren’t any exception. By January, 2019, UK credit card holders owed a collective sum of over £72bn.

We’re citing these figures for a reason: Using credit cards recklessly is the top reason for accumulating bad credit.

Taking Bad Credit Seriously

Experian, one of the leading credit reference agencies in the world, reports that there’s immense room for credit education, especially among the 25-30 age group.

For example, the agency reported last year that teenagers typically had better credit record than the users in their 20s – a sure sign of mismanagement of money. Bad credit isn’t a problem that one can just wish away – it takes months to repair a broken credit record. It also means more difficulty in getting the kind of loans one wants and leading the kind of lifestyle one wishes to lead.

Thankfully, bad credit isn’t the end of the road.

Depending on your credit history and your affordability, many lenders are willing to accept bad credit mortgage applications. We, at Commercial Finance Network, help our customers who may have poor credit at their disposal secure customised, low-interest adverse credit mortgages.

A bad credit mortgage is similar to a regular mortgage. It only involves relatively higher interest rates and requires you to put up a higher deposit. With a leading broker like Commercial Finance Network on your side, you can now work with UK-wide specialist lenders who offer some of the lowest interest rates going around.

Here’s how you can maximise your chances of getting approved for a poor credit mortgage.

It’s Always Better To Approach Specialist Lenders

We’ve already talked about the good news – there are many lenders out there willing to help you buy your dream home despite your bad credit.

But this good news comes with a caveat most brokers won’t talk about: Only specialist lenders can boast of reasonable approval rates in this niche. In other words, if you approach a generic mortgage lender with a bad credit mortgage application, you’re almost guaranteed to have to face a rejection. Banks and other mainstream lenders use stringent algorithms to assess mortgage applications, virtually denying many bad credit holders a chance to step onto the property ladder. 

Such a rejection, when accompanied with a ‘hard credit check’, may further dent your credit history.

The only feasible solution to this vicious cycle is to make sure that you aren’t reckless while sending out your adverse credit mortgage applications. Knowing the track record of your lenders is of utmost importance.

It is, however, easier said than done.

That’s where working with an experienced broker counts in your favour. For example, our bad credit mortgage services help you find specialist lenders who know how to assess your applications based on your income potential, expenses and credit history. This immensely improves the probability of getting a fair mortgage quote.  

Know The Typical Bad Credit Situations Inside Out

Knowing what it takes to get approved while also knowing where you stand in regard with these norms is the key to getting a good mortgage deal. Unfortunately, many applicants are unaware of these finer details, thanks mainly to the fact that their brokers never take any effort to spell these out for them.

We broker bad credit mortgages that cover a range of cases, including but not limited to the following:

  • Missed/Delayed Repayments: Nearly every UK household has debt to repay. This isn’t necessarily a bad thing – it just turns out to be problematic when you fail to make the payments on time. Consistent delays or missed repayments can hurt your credit score, pushing you into the bad credit zone.
  • County Court Judgments: CCJs are typically issued when the creditor approaches a court and the court decides that you owe them money. Getting a CCJ doesn’t harm your credit history as long as you settle the dues within a month. In an event you fail to do so, the CCJ will typically be in force for up to 6 years.
  • Bankruptcy: As should be obvious, bankruptcy cases can make it virtually impossible for you to get any credit. In such cases, approaching a specialist bad credit mortgage lender remains the only viable course of action.
  • Repossession: If you already have an ongoing mortgage on a property (or a secured loan against any other asset) and the lender decides to repossess the property on account of missed payments, your credit history will show the repossession event to all future enquirers. While this is an extreme situation, we do come across such cases from time to time.
  • Debt Management Plans: A debt management plan is a product that helps you reduce your monthly outgoings by clubbing your existent loans into a more affordable package. At times, the creditor may put what is routinely referred to as a DMP flag in your history of repayments, letting future creditors know that you had to resort to using a DMP to pay your bills. This is a relatively less adverse situation, in that creditors feel less at risk accepting DMP cases for bad credit loans.
  • Payday Loans: Payday loans are high-interest and short-terms loans. These are immensely controversial products and should ideally be saved only for emergency situations (if at all). Payday loans also have high default rates, meaning that your lender will want to know if you really are capable of repaying your bad credit mortgage.

When you understand these causes, you can get an insight into how lenders treat bad credit mortgage applications.

Important – Take Steps To Repair Your Credit History

We have already mentioned that bad credit isn’t the end of the road, and you can still get a good mortgage deal using our adverse credit mortgage services.

This, however, doesn’t mean that you should always have to pay higher interest rates. The healthier your credit history is, the cheaper your mortgage will be. Moreover, it’s never too late to start taking steps in the right direction to repair your credit.

Repairing your personal or business credit history is a long process that requires consistent efforts. You can start by following these easy points:

How To Access Your Credit Report?

Credit reports are generated by credit reference agencies. You may already know about the leading ones: Equifax, Experian and TransUnion. These agencies work with lenders and banks to build credit reports for individuals and businesses.

To access your credit report from these agencies, you may follow the directions given here:

  1. Experian
  2. Equifax
  3. TransUnion

How To Build Credit History?

You need not take any particular steps to build credit history. Once your file is created, it’ll automatically get updated as per the information received by the agencies from lenders. If there are any discrepancies in your credit report, you can always get them corrected.

How To Get On The Electoral Roll?

Getting on the electoral roll is one easy step that goes a long way towards building your credit score, authenticating your credit report and safeguarding your identity.

Considering how easy it is to get this done, this should be among the first steps you take to repair your credit history before you apply for an adverse credit mortgage.

Use Your Credit Cards Judiciously

As we mentioned earlier, reckless use of credit cards is probably the most common reason for individuals to fall into a debt trap. We understand that not everyone has the convenience of digging into their savings for regular household expenses, but you should maintain a certain level of discipline while using your credit cards.

If you have one of more inactive credit cards, close them as early as you can to avoid having to pay unnecessary maintenance fees. Moreover, think about moving your credit card debt to the cheapest alternative available. Most importantly, make sure that you make timely payments on your credit card bills.

How To Apply For An Adverse Credit Mortgage?

There are two ways to apply for a bad credit mortgage – approaching the lender directly and working with a broker.

Bad credit mortgages are specialty products, and hence, you are at a disadvantage when you approach the lenders directly. On the other hand, when you work with an experienced broker, you not only get qualified advice from their experts, you also get to access mortgage offers from lenders that otherwise may never have been on your radar.

At Commercial Finance Network, we make applying for bad credit mortgages a breeze through our simplified, no-hassle online application portal.

Time Is Of Essence

Repairing a poor credit score can seem like a daunting task. What many applicants don’t realise is that it’s all about long-term affordability. You can damage your credit score over a short time period but repairing it may take much longer.

In other words, you need to be patient and disciplined in your ways over time to boost your chances of getting approved for a bad credit mortgage. If your credit score is in a really poor shape, do consider letting a few months pass before you apply for a loan of any kind. During these months, you can set your finances straight, make timely payments on your existing loans, settle your monthly bills on time and move the credit needle in the right direction.

At any stage, if you feel the debt you have is overwhelming and getting the better of you, do consider contacting the National Debtline (or any other reputed debt assistance organisation).

What To Look For In A Bad Credit Mortgage Broker?

Commercial Finance Network is one of the leading whole of market brokers in the UK. The features our products bring on board all conform to the highest industry standards and knowing about them will give you an idea about what you should look for in an ideal bad credit mortgage broker.

The Panel Of Lenders

Whole of market brokers can help you connect with a wider range of specialist lenders.

Track Record

An ideal adverse credit mortgage broker should have a satisfactory track record in terms of approval rates and industry reputation.

Transparency

All brokers are required to let you know about the fees and commissions involved. A specially prepared document called the Key Facts Illustration (KFI) will detail the breakdown of fees and commissions, so that you – as a customer – can understand the deal better.

Bad Credit Shouldn’t Stall Your Dreams!

With a range of bad credit mortgage products and a panel of UK-wide specialist lenders, we make sure that every adverse credit mortgage application we receive is treated fairly.

To request a call back from one of our experts, call us on 03303 112 646. You can also submit your bad credit mortgage online.

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10 Common Finance Hurdles UK SMEs Face (And How To Overcome Them)

If you run an SME, you probably are familiar with these all too well. But it’s easier to overcome these finance hurdles than you think!

First of all, let us begin by admitting and acknowledging the harsh reality. The UK economy has been through a constant grind of speculation, debate and uncertainty over the past few years, all thanks to Brexit. Without commenting on the issue, we would just like to mention that not all SMEs are happy about the way things have been unfolding. Nearly 40% of UK SMEs think that Brexit – if and when it actually happens – will leave them worse off in terms of financing and sales. That’s a very serious trend.

However, that’s only a part of the finance riddle. There are quite a few non-seasonal hurdles that SMEs have to face while applying for and getting commercial finance. Here are our picks (and some advice from our experts on how you can easily overcome them).

1. The Personal Credit Vs Commercial Finance Conundrum

This is by far the most common confusion we’ve seen SMEs struggle with. Much of this has to do with the fact that most SMEs are built ground-up without any solid plan for expansion. This, however understandable, is not the right approach. When you start a business, it’s advisable to treat it like a business. Sure, you can use your personal credit cards or even mortgage your home – but you need to know where to draw the line.

Personal loans tend to reduce your creditworthiness, making things difficult for when you want to get a business loan. The best way to overcome this conundrum is to separate personal and business finances as strictly as you can. Your personal creditworthiness should be a credit to your business – not a burden.

2. Bad Credit

This is the most obvious hurdle. If you have bad credit, you’re going to struggle to get a good deal (or any deal, for that matter). It’s important to know what impacts your credit in addition to the usual do’s and don’ts.

We’d like to note here that having bad credit doesn’t spell the end of the road by any stretch of imagination. We, at Commercial Finance Network, regularly broker bad credit loans for many otherwise successful SMEs. You can read more about our adverse credit mortgage services here.

3. No Credit History

Not many SMEs take business credit seriously, thanks mainly to the fact that most operate as sole traders. Quite naturally, it’s not very common for SMEs in the UK to have business credit history.

The easiest way to establish business credit history (you’ll need it when you want to apply for high-end commercial finance products) is to register your business and start trading regularly. Most companies, just by trading actively, are able to establish various credit tracks that help towards their credit history. To speed up the process, you can also use easy-to-access finance products like credit lines, business credit cards, overdrafts and so forth. Short-term finance products like bridging loans and invoice finance can also be very helpful in building a good credit score.

4. Multiple Applications

As is the case with personal credit, your chances of getting approved for a commercial finance product may get severely hampered by multiple applications. If you overestimate your creditworthiness and have half a dozen applications turned down, it’s almost always going to leave a dent in your business credit history.

This, however, is easily avoidable. If you want to directly work with lenders, make sure you are familiar with the lender’s expertise, expectations and track record. If not, you can send your applications through a reputed whole of market broker like Commercial Finance Network to improve your chances of getting an affordable and customised finance deal.

5. Going After Incompatible/Unsuitable Products

Another easy to avoid problem.

If you’re in need of commercial finance, make sure you know what exactly it is that you need. Specialty finance products are always more affordable than blanket packages. For example, many SMEs apply for a generic business loan to cover all sorts of expenses, instead of going for specialty, focussed loans. This not only makes things more expensive; it also increases the chance of having their application rejected.

An easy fix is to know what commercial finance products are available out there, and how you can best customise them to your needs.

6. Not Making The Right Points

This shouldn’t be a point of discussion, but we’ve seen too many SMEs fail to paint themselves in good light.

If you want to work with specialty lenders (like the ones we have on our panel), you will need to make sure that you know your business inside out. And by business we don’t just mean your day to day operations. You need to be able to demonstrate how you are planning to fuel the growth and overcome the competition. A detailed business plan that touches on all these point (and more) will always be helpful in getting lenders on board.

7. Weak Cashflow

This doesn’t and shouldn’t apply to every SME out there. However, you need to ensure that the cashflow numbers are always as healthy as possible.

Lenders, by and large, look for affirmative signs that tell them that you’ll settle the dues. And there’s no better sign of surety than strong cashflow numbers month after month.

8. Short On Security

Many commercial finance products require you to attach a security. It could range from personal guarantees and shares to properties and even vehicles.

Some specialty products (a good example is that of invoice financing) may not work at all without an inherent security. So, before you apply, know how these products work and what sort of security might be needed to get your application through.

9. No Trading History

Many SMEs try to apply for commercial finance right after they start trading. This is a rather hasty approach, because at that point, no SME can show any sign of credibility – no credit history, no volume of transactions and no track record.

To avoid this, we advise our customers to establish a long-enough trading history (typically six months or longer).

10. Tie All The Loose Ends

If your business has availed any loans in the past – however small the amounts – make sure you pay them off at your earliest, before you apply for commercial finance. If you aren’t in a position to make these payments right away, make sure these loans are represented correctly on your credit file, so that lenders can understand why you needed them and how you’re going to pay those back.

Commercial finance can appear daunting – but trust us, it’s anything but. With specialist lenders who know what your business needs, we’ve got you covered. To request more information or to request a call back, please call us on 03303 112 646. You can also get in touch with us here.

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5 Commercial Finance Myths You Need To Be Wary Of

Is your take on commercial finance based on a myth? Read on to find out!

The UK financial market is among the largest in the world. It’s been growing every year, giving millions of people an opportunity to build enough wealth to fund their dreams. With big money, however, come big myths.

At Commercial Finance Network, we regularly come across borrowers who are genuinely worried and apprehensive, all thanks to these distorted truth and outright lies. So, we’ve decided to run a series of blogs that will, we hope, help dispel these myths.

This is the first entry in that series. You may want to visit and bookmark our blog for when you want to return. You can also sign up for our incredibly useful newsletter that will keep you posted about the latest news, updates and articles from the world of commercial finance.

Myth #1. Private/Alternative Lenders Are Always “Predatory”.

This is probably the most common myth of them all. Most entrepreneurs and young businesses have little to no experience of making commercial finance work in their favour, and, as a result, they end up relying heavily – almost too heavily for their own good – on whatever finance options they come across first. These, as you can guess, usually happen to be big banks and high-street lenders.

So, if and when banks fail to give them the deal they want, they either shelve their projects, or turn to alternative lenders as the last resort, but not without a great deal of apprehension.

This is something that will take years to change but change it must!

If you can keep your options open, you can always find alternative lenders who are willing to offer you quotes that are far cheaper, more flexible and faster than the ones you’d receive otherwise. While it’s true that there are many lenders out there who run predatory practices, it’s important to know that when you work with reputed brokers like Commercial Finance Network, you shield yourself from such threats.

Myth #2. I’ll Just Exhaust My Personal Credit Cards First. That’ll Be Cheaper.

 When you’re looking to finance business expenses – they can range from buying a property to funding refurbishments or exiting an active project – it’s very tempting to use the most accessible options first up.

Consequently, many business owners, even before they approach us, have already used up all their personal credit. This includes exhausting credit cards (often, including their partner’s) and stretching personal savings thin. This approach may even work in certain cases, especially when you are confident of establishing a firm source of revenue/investment soon.

But when you aren’t, it may just be better (and often cheaper) to turn to commercial finance for business needs.

Personal loans, more often than not, are small, short-termed and unsecured loans. They can take care of unexpected, emergency expenses, but that’s about it. They have, time and again, proven to be incompatible with business needs, despite an apparent rise in their popularity.

So, in summary, don’t stay under the impression that a personal loan can be a good alternative to commercial finance.

Myth #3. Commercial Finance Is Not For Those Who Have Bad Credit.  

A misconception, more than a myth. This false notion cuts across all commercial finance products, holding back many businesses that shouldn’t even be worrying about bad credit to start with.

It’s true that lenders do and will check your credit file. It’s also true that much will depend on your credit history. What’s not true, however, is that not everything depends on your credit file.

Many lenders specialise in working with individuals and businesses with bad credit. Such products may be a touch more expensive and may require additional security, but they can certainly help in the hour of need.

At Commercial Finance Network, we have a panel of specialist lenders who offer adverse credit mortgages to applicants across the UK.

Myth #4: We Can’t Afford To Wait This Long.

Everybody wants things to move fast, and that’s a perfectly reasonable expectation.

It’s undeniable that commercial finance used to move at a snail’s pace a few years ago. Thankfully, things have changed for the better (we, at Commercial Finance Network, have been at the forefront of this change).

When you work with an experienced broker, you can make things move really fast. For example, every commercial finance product that we broker is designed to take shape at an industry-leading speed. In essence, now is the right time to do away with the misconception that commercial finance is slow and sluggish.

Myth #5: It All Seems So Complicated!

It probably does, and we don’t blame you for it, at all.

Brokers and lenders have a track record of complicating commercial finance products to such an extent that they appear puzzling – especially to first-time borrowers. There are far too many numbers to process, making the whole process a winding dread.

But we’ve got good news. There are experts out there willing to understand your requirements and make these products work for you. Thankfully, we’ve got the best among these experts on our board – and they’re here to help you. When you apply for commercial finance using our portal, we make sure that you are always in charge, and every little detail is explained to you. There’s no room for confusion and there’s no scope for ambiguity. You get what you see.

In Conclusion: Explore Your Commercial Finance Options Bravely, They’re Always Worth It.

Commercial finance is indispensable. Once your business grows past a certain stage, using your personal savings just doesn’t cut it. You’ll need more robust, customised and cheaper financing options that will also be scalable.

Don’t be bogged down by the intricacies of commercial finance. Explore your options freely and make the most of your creditworthiness to fuel the growth of your business. To know more about how our commercial finance services can help you, please contact us here. You can also call us on 03303 112 646 to request a prompt call back.

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Bridging Loans – Why You Need Them, When You Need Them & How To Apply For One

When utilised properly, bridging loans are among the most effective commercial finance products. We try to answer a few burning questions about such loans in this post.

If you operate in the property market, you already know that time is of utmost importance. A good deal can become unreasonably expensive if you can’t close it in time. Worse yet, someone else is almost always ready to swoop in and steal the deal from you.

In short, if you can’t move at a rapid pace, you’ll only make things difficult for you.

But then again, it’s never easy to get property deals worth hundreds of thousands of pounds through without having some time to think, consult with people and arrange for funds. The last part – that of raising money – eventually turns out to be the bottleneck.

Breaking that bottleneck so that investors, developers, landlords and regular buyers can ‘realise’ their dream deals is the prime focus of all bridging finance products.

Before We Start – A Quick Look At What Bridging Finance Really Means

There are quite a few myths that regularly float around bridging loans, especially amongst first-time borrowers. For now, we will just try to clear the air by defining what bridging loans are.

What Are Bridging Loans?

Bridging loans are short-term loans taken (usually) by commercial entities to help ‘bridge’ the gap between required funding and available (or soon to be available) funding.

It’s common for people in the property market to use the terms ‘bridging loans’ and ‘short-term loans’ interchangeably – but that’s not always correct. An easier way to differentiate between the two is this: all bridging loans are short-term loans, but not all short-term loans are bridging loans.

Example

Let’s say you are a property developer. You already have an active project that’s nearing completion. You expect it to complete within next 10 months. For now, you’ve come across a good buy to let opportunity that you don’t want to miss out on. The only problem is, the seller wants you to make an initial deposit of £200,000. You already have active development finance on your project, so you know it’ll be tough to get a buy to let loan.

In this case, a bridging loan can be the most ideal way out. You can, for instance, take a six-month bridging loan with a fixed interest rate. This loan will cover the initial deposit for your new project – and can be paid back once the active project gets completed (i.e. your exit strategy will hinge on the competition of your active project).

Here’s how the numbers would typically work out for such a case:

  • The market value of the property to be used as security: £400,000
  • Maximum LTV offered by the lender: 80%
  • Maximum amount that can be borrowed: £320,000
  • Actual amount borrowed: £250,000
  • Initial deposit to be made: £50,000
  • Balance bridging loan amount: £200,000
  • Applicable interest rate:5% per month
  • Loan term: 12 months
  • Payable interest: £1,250 per month

Why Are Bridging Loans Used? Who Are They Aimed At?

There’s really no limit to the number of reasons people and businesses use bridging loans for.

Even though, at Commercial Finance Network, our bridging finance services focus on the property market, it’s important to note that bridging loans are used across all industries and sectors. They may take different names and forms, but the idea remains the same.

Bridging loans are aimed at people who are looking to enter the property market via any of the regular channels (buy to let, convert, develop or invest). Essentially, if you are a property developer, landlord or investor, you can and should use bridging loans as a viable financing option.

Here’s Why Bridging Loans Are Popular

  • Easy To Get: Bridging loans are easier to get if you have your business and personal credit history in good health. Even when you don’t, lenders on our panel might be interested in your application. You can get a loan for an amount as high as £200,000.
  • Fast: There’s no need to waste time. When you work with an industry-leading whole of market broker like Commercial Finance Network, you get a decision on your bridging loan application within 24 hours. More importantly, we make sure that the lender releases the funds to you swiftly.
  • Flexible: Bridging finance is incredibly flexible. It’s just a short-term loan, but can well be extended up to 12 months, should you feel the need to. Moreover, most lenders are willing to offer interest-only repayments (subject to the viability of your exit strategy).
  • Cheap: Bridging loans we broker come with lower-than-market interest rates. Some of our lenders offer interest rates as low as 4% per month. It should, however, be noted that bridging finance is more expensive than long-term mortgages.

When Should You Consider Applying For A Bridging Loan?

Bridging loans are a specialty commercial finance product. Therefore, to make the most of what they have to offer, you need to know and understand when they are a good option.

Here are some common scenarios that are tailor-made for bridging loans:

Buy To Let Projects

Buy to let projects are well served by bridging loans – especially when your existent credit line/loan is fully invested in another active project.

Residential/Commercial/Mixed Use Development

Development projects, more often than not, end up stretching your budget too thin. There are a million fronts to fight on, and it’s not at all uncommon for developers to run out of money. Such situations – before the project starts or is already in progress – can be taken care of using a customised bridging loan.

Conversions/Refurbishment Projects

If you want to undertake conversion/refurbishment projects, you can take out a bridging loan to cover the costs.

Important: Know What Your Exit Strategy Is!

Bridging loans are incredibly useful when your back is against the wall. That, however, doesn’t mean that they can replace conventional, long-term financing options.

A bridging loan is best viewed as a temporary arrangement – one that saves the day.

Therefore, before you get into a bridging loan contract, it’s important for you to know how you’re going to exit. Common exit strategies include:

  1. Selling the property (being used as security)
  2. Getting a more robust, long-term development finance package or buy to let loan
  3. Placing a mortgage on your new property

Bridging Loans Timeline

A traditional mortgage would take weeks to ‘realise’. Bridging loans, thankfully, are faster.

When you work with us, we make sure that you get a decision from lenders within 24 hours. Once you decide to go ahead with a particular quote, the lender will proceed with the valuation of your property and assessment of your credit file. Everything said and done, a commercial bridging loan can go through within a matter of days.

Finally, How To Apply For A Bridging Loan?

If you don’t want to involve a broker in the process, you can approach lenders directly. This, however, is an approach fraught with risks. When you aren’t familiar with the lender’s approval criteria, you always have a very high chance of getting multiple applications turned down. This puts a dent in your credit score, making it even more difficult for you to get approved.

Such hassle can be avoided with ease, and for a very reasonable cost by working with a leading whole of market broker like Commercial Finance Network. We have on board a panel of UK-wide specialist lenders who are known to offer low interest rates and high flexibility of repayment.

Applying for a bridging loan is easy – just complete this form or call us on 03303 112 646 to get started.

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Why UK Businesses Need to Trade Internationally – The Key Benefits of International Trade for UK SMEs

The Key Benefits of International Trade for UK SMEs – As a business, you’re always trying to find and break new grounds to gain that competitive edge. But, have you considered going global yet?

The history of the world as we know it has been shaped by a complex concoction of ideas, events and people.

But there has always been a strong, undeniable driving force behind much of the development we’ve seen in the post-industrial revolution era: natural resources. The quest for the very best of everything that our planet has to offer has built, transformed and even destroyed civilisations, and international trade is a vibrant reminder of that fact.

Today, no country can afford to sit back and not engage in international trade. Many of Western economic policies stem directly from trade-related reasons and thousands if not tens of thousands of companies in the UK keep the wheel of our international trade turning.

But while all this happens, what does international trade mean for you and your business?

In the more-connected-than-ever world, you can’t possibly afford to ignore the possibilities that exist around the world. If you’ve been apprehensive about the seemingly complex international trade puzzle, let us break some things down for you.

Before that, let’s take stock of where things stand from an SME point of view.

More and More SMEs Are Trading Internationally

Thanks to consistent efforts of successive governments, international trade has seen some promising numbers in the last few years.

Although there has been a marked drop in overall exports in the past two years due to puzzling developments and speculations around Brexit, the overall number of SMEs exporting internationally has increased. The latest figures released by the government indicate that the number of SMEs exporting products and services internationally rose in 2017 by 6.6%.

“With more and more SMEs engaging in international trade (especially exports), it’s clear that it’s indeed possible even for a small business without millions of pounds in cash reserves to expand their operations, customer base and influence around the world with success.”

At 235,000 and counting, the SMEs trading internationally account nearly for 10% of all SMEs in the UK.

Benefits of International Trade for UK SMEs

While there can be cited dozens of benefits of international trade, here are the important ones that UK SMEs need to know:

A. International Trade Allows for the Diversification of Operations

It’s probably the most apparent benefit of going global for SMEs.

As a business trading internationally, you can easily diversify many of your business operations. This includes the two end-points of business – paying customers and suppliers whom you pay. You can access diverse technologies, market opportunities, natural resources and human resources, and make them all work in your favour.

B. Diverse Operations = Better Risk Tolerance

Risk tolerance is a business metric that defines how much of a leeway a business can have against various risks – from market events to uncontrollables like natural calamities.

When you start trading globally, your business automatically spreads much of its risks over a wider geographic area. Of course, this comes with additional trading risks, but they usually offset themselves with associated rewards. Essentially, businesses that import/export can tolerate negative events without sustaining much damage, as opposed to domestic businesses that can suffer irreversible damage.

For example, an unfortunate event like an earthquake can bring your manufacturing operations and domestic demand to a standstill. But if you export the manufactured goods internationally, you can still move the surplus inventory off your warehouses, maintaining the incomings relatively unscathed.

C. Trading Internationally Opens Up New Channels of Revenue

It’s no secret that you can’t have every type of demand in a single market. If you trade only domestically, your operations will always be limited to a certain type of demand. Any fluctuations in those demand forces will have a direct impact on the revenue.

Alternatively, when you trade globally, you can add multiple, previously-untapped revenue channels to your operations. This is just an extension of the previous risk tolerance argument we made, but it’s definitely one of the highlights UK SMEs need to think about.

D. International Trade Isn’t Crippled By Finance Bottlenecks Anymore

The second half of the 20th century was marked by epochal turns. The World War II started a chain of events that was propagated further by the Cold War, followed by the oil-centric upheavals in the Middle East. All these events meant one thing – the money gradually dried up from all international trade that wasn’t related to oil.

Lenders were unwilling to deal with foreign suppliers or banks, making letters of credit an irrelevant option for businesses. Today, we are glad to report, this isn’t the case.

Even a small business with limited capital can easily have letters of credit issued to the supplier’s bank without any problems. Thanks to the good perception UK businesses have in foreign markets, there are fewer things to worry about today than ever. If you’re exporting goods or services, you can just as easily arrange for flexible finance packages that keep the operations running smoothly.

When it comes to trade finance, Commercial Finance Network is an automatic choice for hundreds of UK SMEs. Being an industry-leading whole of market broker, we help UK SMEs access a diverse panel of lenders who bring on board decades of global trade experience. High acceptance rates, customised loan terms and fast approvals are just some of the features that make our trade finance services popular among businesses across the UK.

E. You Can Easily Beat Domestic Competition

Trading internationally means trading on a bigger and wider canvas. By going global, you can make sure that your business has an edge over domestic competitors.

F. A New Lease of Life for the Service Industry

Service provider businesses are among the fastest growing businesses of the 21st century, thanks largely to the internet effect. Given that the UK is one of the most important financial markets of the world, it’s no wonder that UK service providers – especially in the technology, financial and education sectors – have been reaping the rewards of trading internationally.

If you run a service business, you can – at relatively lower cost spreads – access and seize foreign markets.

G. Trading Internationally Promotes Innovation

Innovations isn’t just a buzz word – it’s the primary catalyst for business growth today.

If your business operates in tech, manufacturing or financial sectors, you know this first-hand. Innovation in a far-away market can often have an tearaway effect on your local performance. In such times, it pays to be connected to the world at large – something trading internationally lets you do.

Explore the World of Opportunities With Commercial Finance Network

Whether it’s sourcing better, cheaper equipment from overseas suppliers or exporting goods/services to foreign customers, every well-thought-out international trade move can be a game changer for your business.

At Commercial Finance Network, we help UK SMEs realise their global trading goals with robust, flexible and customised trade finance solutions – from affordable import-export finance to universal letters of credit. Let us worry about mediating with foreign banks and suppliers while you focus on your business.

To request a quote or talk to our trade finance experts, click here.

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Asset Finance Guide for Suppliers: Make Life Easier for You & Your Customers with the Right Asset Finance Solution

Asset finance is a vital finance tool for businesses that can’t afford to invest upfront in essential equipment and machinery. If you are a supplier, offering the right asset finance solution can help you onboard a significantly higher number of customers.

Keeping aside all the business and marketing jargon like ‘cutting-edge’ and ‘state-of-the-art’, it shouldn’t be too hard to see why businesses are constantly in a need to buy or lease newer, better, more efficient equipment, machinery and even software.

This need typically stems from two reasons:

  1. To stay relevant. When all your competitors are moving ahead of the curve, you are forced to take desperate measures to catch up. This isn’t an ideal way to look at things from the business perspective, but it is the cold, harsh reality. We can go so far as to say that many businesses find themselves going for newer assets that they wouldn’t really need if it weren’t for the competition.
  2. To add to the top line. In other cases, buying or leasing assets is a genuine need to maintain, sustain and improve operations. Businesses estimate that the costs of onboarding an asset will compensate themselves through better performance, productivity and/or efficiency, adding more strength to their top line.

Regardless of the reasons, the only thing suppliers need to know and understand that there is and will always be a steady demand for assets (so long as your business is on the right side of technology, trends and market forces). Despite this factor being in their favour, many suppliers and vendors end up performing poorly – thanks in no small part to their inability to look after customers’ needs.

Asset finance solves this problem.

What Is Asset Finance?

Every business knows this very well – it’s much easier to finance products and services than getting cash loans.

This applies even more strongly to small partnerships and sole traders. Getting a personal loan from a high-street lender and diverting the funds towards buying or leasing an equipment they sorely need is a tough task. It not only puts their personal credit on the line, it also means that they end up closing doors on their business should the need to borrow more arise in future.

So, quite predictably, it’s very common to see businesses that are stuck between the proverbial rock and a hard place – the need to have an asset on board and the inability to pay for it.

As a supplier or vendor, this doesn’t bode well for you. You can’t just turn down prospects after prospects just because there’s no workable financing solution to make the transaction happen.

“Even though it’s true that SME loan acceptance rates are promising, businesses will take every opportunity to spread their purchases without touching the cashflow. If you offer your customers a customised asset finance solution through a reliable, market-leading broker like Commercial Finance Network, you can bring down the biggest conversion and sales barrier for your business.”

How Does Asset Finance Help Your Customers?

Before understanding how asset finance helps suppliers and vendors, let’s quickly take a look at why it is so popular among businesses (your customers).

It’s Easy.

It’s much easier for businesses to secure asset finance than getting a business loan. Asset finance is usually tied to the asset being bought or leased, and, in a way, is secured. This allows lenders to be more lenient while assessing asset finance applications.

It’s Flexible.

Asset finance is among the most flexible commercial finance solutions out there. Depending upon the type of asset finance chosen, the borrower can choose the interest-only model or the flexible monthly instalment model for repayment. While leasing the asset, there are usually little to no upfront costs involved for the lessee.

Commercial Finance Network offers some of the most flexible asset finance partnerships to suppliers and vendors. Based on the nature of the asset and the requirements of the borrower, we may be able to extend partial or full finance, customised repayment schedules (including a possibility to introduce repayment holidays) and some of the lowest interest rates going around.

It Makes More Sense.

By not paying the cost of the equipment or machinery (or any other asset, for that matter), the borrower can make sure that their cashflow isn’t hurt. They get to enjoy the benefits of having the asset on board without sacrificing their working capital – a win-win on most counts.

It’s Cheaper.

Buying or leasing assets, in most cases, is tax deductible for businesses. Through Annual Investment Allowance (AIA), businesses can claim tax relief to the tune of qualifying asset expenditure, adding a huge incentive for asset acquisition.

The good news is, the HMRC has temporarily increased the AIA limit from £200,000 to £1,000,000 for two accounting years (starting 01/01/2019).

Find out here if your customers can claim AIA for the assets on your inventory.

How Does Asset Finance Help You, As a Supplier/Vendor?

Being a supplier or a vendor means that you get to work with a variety of businesses. Let’s just assume that you turn down a significant fraction of leads because there is no feasible financing solution available for the customer to finalise the agreement.

In that case, the easiest way to calculate the impact of an asset finance partnership on your bottom line is this:

Let’s say you generate a net profit of £5,000 per sale and £900 per lease.

You generate 2,000 leads per month, with a conversion rate of 1% (in sales) and 1% (in leases). That means you generate profits to the tune of £118,000 per month. If you turn down 0.1% of leads just because the customer isn’t able to secure a good asset finance package, that adds up to £11,800 per month in lost profits!

By forming a no-obligations partnership with a responsible, industry-leading whole of market broker like Commercial Finance Network, you can boost your sales significantly, without incurring any charges. To know more or to request a call back from our asset finance experts, please get in touch with us.

Here are other reasons for suppliers and vendors to offer asset finance to their customers:

It Frees Up Your Money

If you are a supplier, here’s what a typical cash cycle may look like for you:

  1. You purchase an asset from the vendor (day 0).
  2. You pay the vendor within two weeks (money out by day 30, you’re cashflow negative with an asset on your books).
  3. The customer agrees to purchase the asset from you on day 40. The asset is immediately moved off your books.
  4. You’ll still be cashflow negative for the next 30 days.
  5. On day 70, you finally receive the payment for the asset. You book profits and you’re cashflow positive.

Alternative, if your customer had an asset finance solution to facilitate the transaction, this is what happens:

  1. You purchase an asset from the vendor (day 0).
  2. You pay the vendor within two weeks (money out by day 30, you’re cashflow negative with an asset on your books).
  3. The customer agrees to purchase the asset from you on day 40. The asset is immediately moved off your books.
  4. The transaction is complete within 2-5 days.
  5. You book the profits no later than day 45. You’re cashflow-positive.

So, essentially, asset finance significantly improves your cashflow cycle in your favour (from 70 days to 45 days, in this case).

It Removes the Most Common Conversion Barrier.

Investing heavily in an asset is never an easy decision for your customers – especially if they are small businesses.

You can be sure that they are looking around for better deals even when the negotiations are on with you. In such cases, if they can get an affordable asset finance quote, it can be the decisive factor in your favour.

It Doesn’t Cost You Anything.

Forming an asset finance partnership with Commercial Finance Network means you will only be directing your customers to us. Your receivables will be fast-tracked directly to you, without you having to bear any extra costs.

Types of Asset Finance Your Customers Can Avail

  • Hire Purchase
  • Finance Lease
  • Operating Lease

Asset Finance Makes Life Easier for You and Your Customers

As a B2B, you’re going to have to take every measure to improve the conversion rates on all fronts. If you don’t close your customers, your competitors definitely will.

To know more about how Commercial Finance Network’s end-to-end asset finance services help your customers (and – in turn – you), do visit our asset finance page.

Help yourself by helping your customers. Contact us today to request a free asset finance partnership proposal!

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Tangled Up in Unpaid Invoices? Here’s How Invoice Factoring Can Help Your Small Business

Unpaid invoices routinely hurt small businesses. Invoice factoring can be a good way of sorting out invoicing tangles and putting your cashflow in order.

In today’s economy, there really aren’t many better ways of balancing financial stability and job satisfaction than running your own business. A cursory look at the stats should be enough to put this idea into perspective. The ‘entrepreneurship bug’ has already bitten hundreds of thousands of first-time business owners in the UK, and many more are expected to join their ranks.

This is definitely a good sign for the overall economy. But there’s always a downside to such ambitious visions. Running a business is not an easy task. You may need to spend every bit of your savings and many years of your life before you see the idea succeed. The motive behind this post is not to discourage – it’s to educate.

While there are numerous hurdles along the way, we will be discussing a common problem that runs across the board – that of getting paid. We will also try to take a look at how invoice factoring can help address these issues for small businesses.

Good Job on Attracting Customers – But Have You Been Paid Yet?

If your business is young and you’re still starting up, this isn’t a problem you are likely to be familiar with. It, however, is one that you should know more about.

We come across dozens of businesses every month that focus solely on growing the business, without making sure that the work is ‘realised’. The idea of ‘realisation’ of work is straight out of accounting books. The ‘notional’ profits are exactly what they say they are – mere notions. Businesses work hard to sell their services and products, but it’s all for nothing until your bank has confirmed the incoming payment.

This is why your job does not end at sending an invoice. You need to see to it that the customer receives it, approves it and – most importantly – pays it. It’s a rather annoying task, but this is the top line of every business and hence, cannot be ignored.

The Curious Case of Small Business Invoicing

The invoicing problems plague businesses that are not directly consumer facing. The consumer facing businesses seem to get off the hook in this sense – but they have their own billing problems to look after. As far as invoice factoring goes, we will restrict ourselves to discussing small businesses of the non-consumer-facing variety. These primarily include B2Bs and trade businesses.

If you have ever run a business previously or you know how things work for B2Bs, you wouldn’t be surprised to hear this. The waiting time for invoices to get settled is so excruciatingly high that it almost always forces the business to borrow on credit. This, in turn, exhausts their borrowing capacity, leaving them pinned against the wall should the need arise to invest in marketing, growth or research.

Here’s an interesting analysis that sheds some light on this problem.

Invoice Factoring

Comparison of average waiting time for invoice payment by annual turnover for UK businesses – 2016-17 (Courtesy: Statista)

The average waiting time before the invoices are paid stands at around 45 days for all UK businesses. What this means is that every business needs to be able to have enough cash reserves for at least one and a half month to operate normally.

Now, take a look at this number for small businesses (annual turnover less than £5m) – it comes out to be around 62 days. For businesses that turn over less than £1m annually, it further jumps to an astonishingly high 71 days. If you operate in this range, your business needs to have cash reserves for two and a half months.

This, quite obviously, isn’t easy, especially for young businesses.

Failing to see their hard-earned money arrive in their bank accounts on time, these businesses are left no choice but to default on ongoing instalments and mortgages, defer staff salaries and borrow more money than they really need to. This curious case of not getting paid takes an enormous toll on SMEs in the UK. Forbes reports that nearly 1 in 3 SME invoices remains unpaid two weeks beyond the due date, and more than 60% of SME invoices are never settled on time.

What, in such times, should a small business strapped for cash do? Where can and will the next paycheque for the staff come from?

It’s a serious issue – but definitely not one without a reasonable way out. Invoice factoring is a tailor-made solution to common invoicing bottlenecks faced by small businesses.

What Is Invoice Factoring?

Invoice factoring is a type of invoice finance. It’s a commercial finance product that allows businesses to liquidate unpaid invoices with the help of an external lender (the factor).

“Invoice factoring is used around the world by businesses of all sizes. While big businesses and corporations can broker customised deals with banks, the real value of invoice factoring comes to the fore for small businesses that don’t have easy access to credit.”

To understand how invoice factoring works, we need to understand how a typical business goes around invoicing their customers and clients. The process involves four steps:

1. Generation
The business needs to generate the invoice as per standard business practices. The terms of invoice are pre-decided between the two parties involved. In the UK, it’s customary for small businesses to operate on a 30-day invoicing window – the client will be required to pay the invoice amount within this time frame.

2. Dispatch
The generated invoice is dispatched to the client.

3. Approval
The client receives, assesses and approves the invoice (in principle). The approval should ideally come immediately upon receipt, and much before the actual payment.

Remember – if your invoices aren’t subject to invoicing windows, the client may not necessarily have to follow this step. If you don’t have the client’s approval, it will be difficult to factor the invoices.

4. Payment
The client settles the invoices within the invoicing window as per their convenience.

Where Does the Problem Lie?

The problem usually lies between the third and the fourth step.

  • Long Waiting Times

There are times when a business has to agree to invoicing windows that are in favour of the client. This is a common ‘closing’ tactic that allows businesses to snag more customers. The downside is that the invoices stay unpaid for weeks – if not months.

  • The Client Doesn’t Pay on Time

We have already seen how it’s very common for small businesses to have to deal with clients that fail to pay on time. This means that the services you have offered actually depreciate in value – an unfortunate thing.

How Invoice Factoring Works

Invoice factoring aims to address both these problems in one go. Here’s how it works:

  • You compile the unpaid invoices in your sales ledger into two categories – approved and pending approval. Lenders are usually not too keen on buying unapproved invoices unless you have a strong business history with that particular client.
  • You ‘outsource’ the collection of approved invoices in bulk to the lender.
  • Once the paperwork goes through, you receive a cash credit equivalent to the factored invoice amount (minus the lender’s fees).
  • The lender assumes the responsibility of collecting the payment from the client, and your business receives the much-needed liquid cash.

The Advantage of Invoice Factoring for Small Businesses

Being a leading whole of market finance broker, we – at Commercial Finance Network – have seen the impact a good invoice finance deal can have on small businesses. Here are the advantages that invoice factoring brings to the table:

Easy Access to Cash

Cash – no matter how things change – is the lifeblood of small businesses. If you don’t have enough liquidity in your business accounts, it’s nearly impossible to carry out day-to-day operations. With the help of invoice factoring, small businesses can add extra liquidity to their books, eliminating the need to borrow each month.

Flexible Amounts

Other commercial finance products are not as flexible as invoice factoring. With invoice factoring, you decide how much you wish to borrow and at what cost. It’s relatively easier to find a lender who’s willing to accept your terms, given that you work with an experienced invoice finance broker like Commercial Finance Network.

No Repayments

The best part is you don’t have to worry about making monthly repayments. When you factor your invoices, you essentially sell them to the lender. This makes invoice factoring more of a B2B transaction than a commercial loan.

Relatively Cheaper

Invoice factoring is usually much cheaper than a comparable business loan. Since the risks associated with approved invoices are usually on the lower side, lenders can afford to pass the savings on to you. This results in lower fees and more quotes to choose from.

Focus on What You Do the Best

Small businesses have their plates full. Administrative tasks – from bookkeeping to taxes and HR to PR – routinely take your focus off the main goal – growing the business. ICAS estimates that small businesses, on an average, lose one work day every week in managing admin tasks.

Unpaid invoices only add to this never-ending stream of tasks. By factoring invoices, you have one less thing to worry about. Submit the deliverables, get the invoices approved and move on to the next big thing!

Less Burden on the Collection Infrastructure

Small businesses usually don’t have a dedicated team for collections or receivables. Factoring invoices significantly reduces the burden on the personnel who are responsible for ‘chasing’ the clients for money.

Many Lenders Offer Bad Debt Protection

Running a business means coming across all sorts of people. There are bound to be unsavoury experiences and the proverbial ‘bad apples’ that just refuse to pay. You can add a bad debt protection feature to your invoice factoring agreement to safeguard your business from such instances.

Nothing is Perfect. Invoice Factoring Too Has Its Downsides.

Make these considerations before you get into any invoice factoring deal:

Is the Lender Trustworthy?

When you factor invoices, you essentially invite the involvement of a third-party into your business operations. This is one reason that puts many small businesses off. That said – as long as you work with a reliable and reputable lender and broker, there should be little to worry about.

What About the Clients? What Will They Think?

This is a common and very valid apprehension.

It’s also a reason why you should never work with lenders who don’t have a demonstrable factoring experience. You don’t want your clients having to deal with pestering, unprofessional and – worst of all – unethical collectors. A good way around this problem is to use confidential invoice factoring services.

Should You Just Borrow Instead?

It’s entirely up to you and the situation you find yourself in.

Invoice factoring is a faster process than conventional loans and alternative finance products. If you can afford to have a loan on your books each month or quarter, there’s no reason not to go that way. Invoice factoring is best seen as a permanent fix to all invoicing problems, and not as a primary source of capital for a business.

Invoicing Problems Are Common. How You Deal with Them Is What Matters.

You can either choose to get bogged down under the weight of unrealised revenue, or you can leverage the unpaid invoices to your benefit. It all depends on the health of your business, your relationships with your clients and your access to credit.

At Commercial Finance Network, we help you choose from multiple invoice finance offers from the most reputed, experienced and responsible lenders across the UK. Having grown our business from the ground-up, we know exactly how important this is to you.

Don’t let unpaid invoices hurt the top line revenue. Contact us today to request a free, no-obligation invoice finance quote today!

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Government Grants for SMEs in the UK – A Hands-on Guide

Winning a government grant can be a real boon for SMEs looking for funding, technology or expertise. In this post, we will discuss everything an SME needs to know about such grants.

Running a successful business is all about pre-empting, overcoming – and, at times – walking around hurdles. These hurdles come in every shape and size you can think of – from HR and compliance to marketing and branding. But if there’s one common denominator among all the problems businesses face, it has to be the money.

Take funding, for example. SMEs around the world and across the board are known to struggle when it comes to raising money. SMEs in the UK are no exceptions to this. In fact, so difficult is raising money via traditional, mainstream and high-street lenders that SMEs have gradually started thinking beyond banks and towards alternative funding channels.

In such times, the role played by the government becomes more crucial than ever. Government grants are, without a doubt, the face of this role. This is the reason why understanding how these grants work and how your SME can give itself a good shot at winning one are important. In this post, we will try to cover what government grants for SMEs are, how they work and how to find and apply for a grant that is suitable for your business.

What is a Government Grant?

A government grant is essentially an incentive package made available by various government bodies and organisations to individuals as well as businesses. Government grants (barring the finance grants) are usually non-repayable.

Depending upon the nature of the grant body and the grant objective, these grants can come in a variety of sizes and formats. As far as small businesses are concerned, such grants range from £1,000 to £500,000. Some of the bigger and more prized grants can go even higher.

Why Are Grants Given to SMEs?

Government grants have been there for a long, long time. The names and forms they have taken may have changed over time – from business subsidies to business support – but the objectives haven’t. If you were to analyse government grants across business sectors and districts, two things become very clear:

  • Most government grants have a singular objective – to keep the economy growing. This objective takes many avatars such as employment generation, sectoral development, regional development and so on. Grants that have these objectives are more or less permanent fixtures.
  • Other grants aim to follow, aid and complement ongoing policies of the government. Such grants typically reflect the incumbent government’s views in regard with trade, environment, social welfare, technology etc.

To put things in a more sweeping perspective, we can say that government grants have three clear objectives:

  • Boost economy through regional and local development
  • Generate employment by supporting businesses
  • Create an economic environment that encourages innovation, entrepreneurship and ‘home-grown’ research

As of 2018, nearly 200 government grants are available for SMEs in the UK.

Why SMEs Should Take Government Grants More Seriously

Even though government grants are incredibly appealing, very few SMEs actually realise the potential of such grants. Here are some features of government grants that SMEs can’t afford to overlook:

Government Grants Are Diverse

Very specific grants are available across all business sectors. This allows SMEs to compete more fairly for similar grants.

Grants Are More Than Just Money

As we will discuss in the next part of this post, government grants offer much more than just money.

Winning a Grant Validates Your Business Idea

A large number of SMEs are stuck in the validation loop that stops them from expanding or trading more confidently. Inadequate funding makes matters even worse. A grant can be a good way to turn the corner in such times and receive external recognition and validation.

Government Grants: Shortcomings & Drawbacks

While the features associated with government grants are certainly attractive, there exist shortcomings and drawbacks you should be aware of:

The Competition Is Fierce

The competition for government grants is fierce to say the least. Since young businesses, start-ups and established businesses all tend to spill over into the space that’s reserved for SMEs, the competition can become entirely off-putting.

It Can Take Months Before You See the Money

Applying for a government grant isn’t always the smoothest of processes. It can take many months for the assessment process to conclude, making grants irrelevant for businesses that require urgent funding.

Grants Can Never Replace External Funding

Given their limitations in size and scope, government grants cannot replace external, third-party funding channels – not in the long run, anyway.

Types of Government Grants for UK SMEs

In our guide to start-up funding, we have already discussed the various types of government grants. In the context of SMEs, these types remain more or less the same.

Direct Grants

A direct grant is a project-specific and objective-driven cash reward to businesses that meet the criteria. This is what most businesses think of when they think of a government grant.

Despite being the most popular and sought-after type, these grants come with a host of limitations and riders. As things stand today, direct grants focus more on young SMEs (trading for 5 years or less) in economically disadvantaged regions and districts. Furthermore, the grant amount is usually on the lower side. Given these facts, one would be forgiven to think that direct grants are good for encouraging businesses, but not necessarily supporting them.

  • Direct Grants Are Not Free Money!

It’s a common misconception among business owners and operators that winning a direct grant is just like winning a lottery. The fact is direct grants are nothing like free money.

Almost every direct grant scheme requires you to match the grant amount – a pound for a pound.

In other word, a direct grant of £10,000 will need you to raise £10,000 on your own before you see any of the grant money.

We, at Commercial Finance Network, have helped numerous SMEs raise the capital required to win direct grants. You can learn more about our services here and request a free quote here.

  • Most Direct Grants Are Project-Based.

Unlike other grant types, direct grants are almost always project-based. The grant objective clearly tells you what you’re expected to spend the money on. Some grant bodies go so far as to monitor the spending.

  • Example

A good example of an SME direct grant is the Business Energy Efficiency Programme organised by various local councils in the West Midlands. This direct grant offers rewards up to £20,000 for the qualifying businesses that implement energy saving technologies in their operations.

Finance Grants

If you are looking for a well-meaning financing support for your SME, finance grants should always be the focus of your search.

A finance grant combines the features of grants and loans. Also known as ‘soft loans’, such grants are an excellent way of raising a significant sum of money for SMEs. Typically, the loan amount can go from as low as £5,000 to as high as £250,000. Finance grants are usually available around the year. Unlike direct grants, however, finance grants are repayable. The terms of repayment are subsidised through public funding. So, you may either get a loan that’s fully free of interest, or you may get a lenient repayment schedule with generous repayment holiday months/years.

  • Soft Loans Are Not Always Project-Based

Unlike direct grants, finance grants (soft loans) aren’t always project-based. The grant objectives can be wide-ranging to allow you more control over the spending.

  • The Qualification Criteria Can Be Stringent

Quite a few finance grants require you to prove that your SME is unable to secure funding from other mainstream lenders. This translates into additional documentation and longer processing times.

  • The Grant Amounts Are Flexible

The biggest advantage that finance grants offer is their flexibility. You can negotiate the loan terms and amounts with the grant body (much unlike direct grants that leave no room for negotiation).

  • Example

ART Business Loans make for a good example here. This finance grant offers low-interest loans to businesses that generate employment in the West Midlands. The loan size ranges from £10,000 to £150,000.

The UK Export Finance (UKEF) scheme is also a very fitting example of how government grants are at their efficient best when partnered with private investors and lenders. It aims to promote exports to our major cross-border trade partners by helping SMEs raise funds, win overseas contracts/orders, fulfil these orders and access trade finance.

Tax Relief Schemes

Tax Relief Schemes are indirect grants offered to qualifying SMEs. There are little to no upfront benefits to such schemes. In the long run, however, these tax savings can be very attractive. Here are some common and ongoing tax relief schemes that you can focus on:

Tax Relief Schemes for SMEs

1. Employment Allowance

Most businesses are required to contribute to the National Insurance every year. By securing the Employment Allowance, your business can save up to £3,000 on these contributions.

2. SME Business Rates Relief

All properties owned by businesses are charged business rates by local councils. If your business holds one property (valued at £12,000 or less), you can apply for 100% Small Business Rates Relief. For businesses holding two or more properties, it’s still possible to get proportionately lower relief.

3. Corporation Tax Reliefs

  • Capital Allowances let SMEs claim tax reliefs against the purchase of business assets.
  • R&D Reliefs are meant to encourage R&D spending.
  • Creative Industry Tax Reliefs provide special tax reliefs to ‘creative’ industries such as arts, film, theatre, music and digital media.
  • The Patent Box is one of the most exciting tax relief schemes out there. This scheme allows inventors and businesses to claim tax reliefs against profits made by the use or licensing of their patents.
  • There are many other Corporation Tax Relief Schemes tailored for the need of SMEs. You can refer to this page to learn more.

Tax Relief Schemes for SME Investors

1. Enterprise Investment Scheme (EIS)

The Enterprise Investment Scheme is perhaps the strongest investment magnet for SMEs. Under this scheme, SME investors can claim tax credits and reliefs of up to £300,000 each year. This scheme applies to total investment of up to £5 million per year.

2. Seed Enterprise Investment Scheme (SEIS)

This scheme is similar to EIS but limited in scope to serving start-ups and young businesses. If your SME has been trading for no more than 2 years, your investors can claim tax credits under the SEIS.

SME Grant Finder: How to Find Government Grants

Searching through available government grants is no longer a dreadful or time-consuming task. Just head over to the Business Finance and Support page and filter through the available options. This page allows you to zero in on government grants based on your location, business type, size and turnover.

5 Steps SMEs Need to Take to Win Grants

1. Applying Early

Applying early gives you an important edge over competitors. To be able to do this, you need to be aware grant announcements.

2. Preparing a Detailed Business Plan

It doesn’t matter what sort of loan, support or grant you are after – you will always need a business plan that paints a clear picture of the present state of your business and your future objectives. A good, in-depth business plan that answers questions even before they are asked enormously improves your chances of winning government grants.

3. Understanding the Grant, the Grant Body and the Grant Objectives

If your grant application is rejected, it’s very much likely that the fault lies neither with your business nor the grant – it lies with the incompatibility of your objectives with those of the grant body. The best way to avoid this is to apply for grants that share objectives with your business.

4. Having Professionals on Board

If you don’t have prior experience in applying for grants, it’s always a good idea to hire grant experts and consultants.

5. Preparing a ‘Winning’ Grant Application

A generic, off-the-bat grant application is never going to win you a grant. Preparing a grant application that lets the grant body know how you share in their objectives is the key.

We Help SMEs Grow!

Government grants offer a host of opportunities for SMEs to raise the much-needed funding. It is, however, never a good idea to rely heavily on government grants. The timelines are unpredictable, the amounts are usually lower than what you need and you will, in most cases, need to raise external funding anyway.

But it’s not all bad news – there are easier way to fund your business.

Commercial Finance Network – a leading whole of market broker – has helped many SMEs across the UK secure fast and low-interest funding. To know more about our industry-leading finance services, you can visit this page.

Check your eligibility for a low-interest business loan and other finance products by requesting a free quote here.