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The benefits of using a financial broker

Here we look at the benefits of using a commercial finance broker and how you can go about finding one.

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There are things you can do as a business to help yourself when you are looking for finance from a bank. Many SME owner managers find it harder to secure those vital funds without some additional help. If you seek professional advice, a good finance broker will be able to help you get the right kind of finance for your business.

Brokers who are members of the National Association of Commercial Finance Brokers all adhere to an industry recognised Code of Practice so, if you use a broker with the NACFB logo, you know you'll be getting a good service.  

But, if you're not convinced, the points outlined below should give you a reason to try a broker next time you need to access some cash - and there are some things you can do yourself that will help you secure the finance you need.

Be prepared 

Until recently, a lender would be comfortable lending money based purely on the value of the property the loan was secured against, and they were willing to take the SMEs word for it that they could afford the repayments. This ‘self-certification' or ‘non-status' market has largely disappeared now and lenders are much more cautious. As a business owner, you need to prove to your lender that you are on top of your finances and that you are a competent and capable manager. The best way to spot trouble coming (and reassure your bank manager that you are a responsible borrower) is to plan your budget, forecast your cash flow and most importantly, to check them against your actual figures on a regular basis. 

DIY is difficult! 

One of the main advantages of using a broker for sourcing your business finance is that they will do all the time-consuming shopping around for you. In the current economic climate, lenders have become much more cautious about how much they lend and to whom, and a broker can help you put a case together which is more likely to be successful.

In a recent case from one of our members, a client approached the broker after they had been turned down by their bank. Once the broker had looked through the deal and restructured it, it was then resubmitted to the client's bank who, this time, accepted it.  

Look at the whole business 

A broker can help in securing a more flexible kind of finance. Commercial mortgages are a long-term commitment and also a relatively inflexible form of finance; so alternative arrangements could be made for equipment and other assets the business holds. If a business owner wants to borrow to buy a business, rather than take out a large mortgage a broker will look to see if some assets could be leased to release funds, or a factoring arrangement put in place to ease cash flow.  

The simplest option isn't always the best 

The finance you need might be more appropriate for your business if it came from a different source (and I don't necessarily mean by that a different lender). A good example is using an overdraft for easing cash flow. If a business is expanding rapidly it could soon outgrow its overdraft arrangements, putting it in danger of excess fees and its cash drying up completely. Because invoice finance advances money against the amount of invoices raised by the business, the higher the value of the invoices, the more cash is advanced. This means that cash supply can keep up with the accelerated levels of trading; vital if you're in a period of rapid growth.  

Commercial finance needs an expert 

Commercial finance is a complicated subject. Unlike standard residential mortgages, which have neatly defined rates and criteria, commercial finance is much more tailored and requires a good degree of skill and experience to find the right deal, something which has become even more evident in the current market. If your business needs finance, you would be wise to seek professional help. Hopefully, the advantages of using a broker should outweigh any concerns that you may have and you should feel confident in outsourcing this part of your business. You should save both time and money that you could better spend elsewhere 

About the NACFB 

The NACFB is the UK's trade body for commercial finance brokers. All NACFB members comply with a Code of Practice. Visit www.nacfb.org.uk and enter your full postcode to find the broker nearest to you.

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