GUIDE TO BORROWING BUSINESS LOAN.
Did you know that the Government is lending ￡20million to businesses through Funding Circle
If you take out certain loans, up to 20% will be funded by the Government.? It’s part of the Business Finance Partnership programme and together with the thousands of people already lending through our marketplace, it means we can help even more businesses with a loan.
These loans are funded by the Department for Business, Innovation and Skills (BIS) and the funding will be provided to each eligible business as a loan on equal terms with the participating private sector investors.? A total of ￡20 million has been allocated to Funding Circle through this programme.? Neither BIS or any Government agency is involved with the operation or management of the loan.
If you’re an established business in the UK with a good track record, follow these simple steps in this guide to have the funds you need in a matter of days.
1. WHICH LOAN SUITS YOUR BUSINESS?
Choose from the range of flexible business loans:
i. Unsecured loans:
These are highly flexible loans that can be used for a wide range of purposes, including working capital, expansion capital, asset purchase and more. In most cases, lenders require a personal guarantee (PG) as security.
This ranges from ￡5,000 - ￡10,000
In some cases, we can offer unsecured loans up to ￡150,000
ii. Secured loans
These loans can also be used for a wide range of purposes, including working capital, expansion capital, asset purchase and more. Lenders take a charge over assets in the business as security.? A PG may also be required. This ranges from ￡100,000 - ￡1million
?ii. Asset finance
These loans can be used to purchase a new asset or re-finance an existing one.? The title to the asset is held as security by Funding Circle (or alternatively, lenders can take a charge over it) until the loan is repaid. This is between the range of ￡30,000 - ￡1million
?iii. Property finance?????????????????
These loans can also be used for a range of purposes and are secured with a first or second charge on a portfolio of properties within the business. ￡100,000 - ￡1million??????????????
2. APPLYING FOR YOUR LOAN
Completing your application form
Once you’ve registered, your business borrower account will be set up so you can start your application:
Part 1:? Complete these sections
i. Business and loan details.
ii.?Details of other loans and credit the business already has.
iii.?A brief description on what the business does, why you’re safe to lend to and what the loan is for.
iv. ID checks, including your driving licence or sort code details so we can validate your identity.
Part 2:? Send your latest filed accounts and up to date management accounts.
To assess your application, we’ll also need the following:
i. Latest full filed accounts (unabbreviated, including profit & loss statement).
ii. Up-to-date management accounts.
iii. For secured loans, asset finance and property finance, some additional documents are required – you can download these documents when you apply.
?Checklist:? completing your application
Have you completed the following?
i. Completed the online application and clicked ‘authenticate & submit’?
ii. Emailed your latest full filed accounts and up-to-date management accounts?
That’s it!? You’ll have an answer from our credit assessment team within a few days.
Passed the assessment process?
It’s time to get your funding, which happens via a loan auction.? Read on to learn more about this stage.
3. THE LIVE LOAN AUCTION: INVESTORS FUND YOUR LOAN
With over 30,000 investors, including individuals, local councils, universities and the government, an auction process allows everyone to participate in your loan, ensuring you get the best rate possible.
How it works
The process is simple: all investors can offer to lend you money.? Those investors offering money at the most competitive rates automatically become part of your loan.? Typically, your loan will be funded by several hundred individuals, the government and possibly universities or your local council as well.
The auction runs for a few days up to a maximum of 14 days.? If you need funds sooner, you can end the auction and accept your loan as soon as its 100% funded Please note that all required documents must be received before funds are released – read more about this in section 5.
Answering questions from investors
A key part of the auction process is the question & answer section, where investors may ask your questions to help inform their lending.? When this happens, you’ll receive an email alert and it’s important to answer these questions quickly and with as much detail as you can.
This leads to more investor participation in your loan, which results in a more competitive rate for you.? You can see these questions and answer them in the summary page of your account.
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4.WHAT IS THE COST OF MY LOAN?
Loans are repaid in equal monthly instalments and the cost is determined by two factors:
i. Your interest rate:? this is the weighted average of all individual rates of those investors who have funded your loan.
ii. Your fee: you only pay one fee, and only if you decide to accept the loan.? There’s no cost if you decide not to progress with it
Loan type:
1. Unsecured or secured loan
Term & Fee:
Term: 6 months or 1 year Fee: 2%
Term: 2 or 3 years Fee: 3%
Term: 4 or 5 years Fee: 4%
2. Asset finance:
Term: 2 to 5 years Fee: 5%
3. Property finance
Term: 3 years Fee: 3%
Term: 5 years Fee: 4%
For example, Cable & Cotton borrowed ￡50,000 in 2012 to fund growth of their business.? The cost of the loan was ￡7,491.19
Based on a ￡50,000 loan over 3 years, repaid in 36 equal monthly payments:
Cost (rate) & Cost (amount)
Interest (annual rate): Cost (rate) 7.75% Cost (amount) ￡5,991.19
Fee: Cost (rate) 3% Cost (amount) ￡1,500
Total cost – interest + fee: Cost (amount) ￡7,491.19
Monthly repayments: Cost (amount) ￡1,597.98
NB:? If a loan is repaid early the interest charges will be lower.
5.READY TO ACCEPT YOUR LOAN? HERE’S HOW
1. Accept your loan online
As soon as your loan is 100% funded, you can close the auction and accept it, or you can leave the auction open until it ends.? You have up to 5 working days after the auction ends to accept.? Complete this process in a few short steps:
Your loan contract will be sent for you to review.? You will also be sent the contract at this point for your records.
All loans are repaid via direct debit.? You’ll be asked to agree to this method of payment and to return the direct debit mandate to us.
2. Send any required documents back to us
All loans require a signed direct debit mandate and also require a personal guarantee or other security agreement.? Our credit team will email the documents we require for your loan with details of who needs to sign them.? We need these signed original documents returned to us by post before we can release your loan.
We pay your loan the same day we receive everything from you.
As long as you’ve completed the online acceptance process and we’ve received your signed documents by 3pm on any business day, we pay the loan into your designated business bank account the same day.? (NB funds can take up to 3 days to reach your account).
6. REPAYING YOUR LOAN
One simple monthly repayment
Loans are repaid in equal monthly instalments, via direct debit, over the term you choose for your loan and your first repayment falls one calendar month after your auction ends.
Important note: Your monthly repayment to investors will fall on the same day of the month that your loan auction ended.?Typically, the direct debit is taken 5 working days before this date, to ensure funds are received from you in advance of the payment to investors.
Repaying your loan early? No problem
You can repay the full amount early at any time with no penalties.? Simply make the final payment for the balance owing on your loan, including interest owing for that month.
Need a second loan?
You can also take out a second loan before you’ve finished repaying your first.? Typically, 6 months’ repayments are required on your first loan before applying for your next one.? (NB. excluding asset finance loans, where second loans can be applied for immediately after the first).
Getting finance should be quick and easy, so you can get back to doing what you do best – running your business.? That’s why we’ve cut out the complexity and hassle of borrowing, creating a range of highly flexible loans that you can apply for.? Whether it’s for cashflow, asset purchase, expansion plans, commercial property or a wide range of other reasons, we can help with a loan of ￡5k - ￡1million.
For further information, contact us
Tel: 07768 390330
Email: [email protected]