For business owners seeking finance, securing the funds you need is only part of the challenge. The structure, total cost and long-term implications of borrowing can be just as important as the amount of funds available.
Going it alone can mean you either can’t find the solution you need, or the costs are sky-high.
I recently supported three businesses with very different requirements. For each one, finding the right solution meant looking beyond a conventional loan application and considering the client’s wider commercial and financial position.
SME Property Refinancing: Finding a Solution for a Complex Transaction
A children’s nursery came to me, needing to refinance a property held in the owner’s father’s name. The transaction had to repay existing borrowing, provide funds for an associated Capital Gains Tax liability and follow an agreed tax-planning structure.
Their needs were complicated and they couldn’t find a solution alone. I worked alongside the client’s accountants, solicitors and tax advisers to arrange a suitable commercial mortgage and coordinate the lender and valuation requirements. This allowed the transaction to proceed within the required structure while protecting the nursery’s future. There are almost always solutions when you have the right advisors around you.
Business Loans: Why the Total Cost of Borrowing Matters
Another business owner came to me to check their financing options. They had an offer of a loan for approximately £160,000, but were walking into a potential nightmare. Although this appeared manageable when viewed as a monthly repayment, the business would have repaid approximately £469,000 over five years. A staggering total cost.
I helped them understand how this could affect future profitability and borrowing capacity. They agreed that we needed to look at other options, and I secured a more proportionate £75,000 loan at approximately 12%, providing the essential short-term capital while giving the company room to trade profitably and strengthen its financial position.
Funding a Business Acquisition: Looking Beyond Conventional Lending
A third client needed to release equity in their property to support a business acquisition, including a buy-to-let transaction on their own property, plus an additional cashflow loan. Conventional business lending options were available, but total overall costs were high. Planning considerations that needed resolution before funding could be finalised made things even more complicated.
By looking carefully at their property and financial position, I was able to find a solution that used the client’s property assets alongside cash-flow funding. Although different from the solution they originally thought they needed, it enabled the business to complete on their property deal and to access the working capital they needed.
Choosing the Right Business Funding: Take a Wider View
These cases illustrate an important principle that I apply constantly in my work securing finance for SMEs: the most appropriate funding solution is not necessarily the largest loan or the first offer available.
A good finance adviser will consider total repayment costs, affordability, transaction structure and the effect of borrowing on the business’s longer-term plans. We will also collaborate with accountants, solicitors, tax specialists and other advisers to develop a workable solution.
This wider view can make the difference between just obtaining finance and securing funding that genuinely supports the future of the business.
UK Business Advisors members work with SME owners and leadership teams across the UK on funding, financial resilience and wider business growth. By bringing practical experience and, where needed, specialist expertise together, a UKBA business adviser can help you look beyond the immediate problem and identify a solution that supports the longer-term needs of your business.