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Fit for Purpose Funding

While banks have historically been the first port of call for business owners looking for finance, many businesses are not aware of the range of alternative financing facilities available in the market. In fact, non-bank financing now makes up a much larger share of the financial system than it did a few years ago, as businesses look to the open market for more tailored financing solutions.

Non-bank finance solutions are flexible, tailored, and offer competitive market rates, making them a strong alternative to traditional banking products. If a business is looking for an overdraft or a term loan from a bank, typically this type of financing requires an SME to have good profitability, a strong level of equity, as well as standard supplier and customer terms of trade. In the aftermath of the Covid pandemic, this can be increasingly difficult for businesses due to ever-tightening lending criteria.

Yes, bank funding can be fit for purpose, but only if the business fits into the narrow eligibility requirements.

In our experience, there are a vast number of businesses that do not fit into this narrow segment, or sometimes a bank is simply not “fit for purpose”. Recently, we have seen business owners frustrated as banks impose stricter lending conditions, often forcing owners into unsustainable financial positions by having to guarantee loans against a major asset.

Lock Finance emphasises to clients that there are a multitude of other financing options available depending on their needs, with many far more beneficial to businesses than traditional banking products. Some of these options include Invoice Financing, Purchase Order Finance, Leasing, Sale, and Lease Back.

The benefits of these non-bank products are that they recognise that businesses can fluctuate up and down with revenue and profitability depending on their business cycle. We have also seen recently that this is particularly true when unforeseen economic factors are in play, like lockdowns or a rising interest rate environment.

The benefits and the main difference between traditional bank lending products and non-bank lending products are the flexibility non-bank lenders provide as well as the ease and simplicity it takes to access funding. These products are more tailored to specific needs and the position of your business as well as offering repayment terms that are unique to a client’s revenue streams. Not only do they provide specific solutions but they are prepared to lend solely on the assets they are financing, which means there is no need for directors' property for security.

Funding that is fit for purpose is essential for any business, to help match business requirements to terms that suit both the business and the lender.

With many non-bank solutions in the market, Lock Finance works with clients to find solutions that work for each business, no matter their financial position and revenue.

Lock Finance is always happy to talk to businesses that require fit-for-purpose working capital facilities. We can recommend specialists who can work to find the best fit-for-purpose term loan facilities for you and your business, despite being turned down by their banker.