Refinancing existing loans, investing in new assets, renovating your current park, or even acquiring a new park are some of the reasons you may wish to apply for a business loan. However, in the current economic climate it isn’t always easy to be successful in your application. Lenders want to ensure your business is financially sound, has sufficient security and can meet capital and interest payments on the loan. Lenders will also want to test serviceability if rates were to rise.
The bank base rate has risen significantly over the past year from 0.5% in February 2022 to 4.5% in May 2023 resulting in increasing loan servicing costs. Against this unfavourable backdrop lenders are increasing their checks, resulting in transactions taking much longer to conclude (sometimes several months) and more applications being rejected.
The security you have to offer will need to be considered. In our experience, lenders will typically look for a maximum loan to value ratio of around 55%-65%.
Depending on the loan amount and level of risk, some of the information lenders may require include:
- Financial statements for the past 2 years
- Business plan, financial projections and cash flow forecasts showing the plans for how the loan will be spent
- Park valuation for security
Not having this information readily available could delay the application process.
Demonstrating how you will repay the loan through financial projections and cash flow forecasts is becoming increasingly important in being successful with your application. Lenders are looking for a track record of profitability to provide additional comfort for any lending. Your accountant can “stress test” your forecasts under various what-if scenarios to help give reassurance that repayments can be met in the future. Lenders will also have more confidence in the financial information if your accountant has assisted with the preparation of it.
Some alternative finance options to consider include stocking loans and asset finance with the use of specialist finance brokers becoming more commonplace.
Applying for a loan can be time consuming and stressful, with more scrutiny on applications it is now more important than ever to get specialist help to ensure you get the right finance for your business.
If you’d like support with securing the correct finance for your business, please get in touch with our EQ Leisure team by calling one of our offices or emailing leisure@eqaccountants.co.uk.