More and more small and medium enterprises (SMEs) in the UK are applying for a small business loan from a peer-to-peer lender to help them get funding for working capital, expansion and asset purchases to enable them to grow. Around 10,000 SMEs received a total of £881 million in funding through peer-to-peer lenders in 2015, illustrating that this form of finance is becoming increasingly mainstream.
LendingCrowd has a quick and easy application process to help make applying for a small business loan as straightforward as possible, and our experienced Credit Team looks at each loan application on its own merits to ensure that successful applicants receive the funding that’s right for their company. In this blog, we give you some top tips from our Head of Credit, Ian Cunningham, on what he looks for when assessing applications.
A detailed description of your business
We treat each loan application on a case-by-case basis, and an important part of our assessment is to find out as much about each business as possible. This starts with us checking that our initial criteria, 2 years’ trading and approx. £100,000 turnover, are met. We also look for detailed information contained in the applicant’s pitch on what the business does, what the loan will be used for, and the management experience of the team running the business. All of this information helps us to better understand the Borrower’s needs and what the funding will be used for, which gives us flexibility in making decisions.
Your financial information
The Borrower’s financial information helps us to build up a picture of the business, including its creditworthiness and its ability to repay the loan. This information includes 2 years’ filed accounts, management information to the last quarter, and the last 3 months’ bank statements. We also look at a business plan if possible (the more detailed the better!) so we can see the future plans for the company and how funding would fit into these. Any available cash-flow forecasts and projections are also reviewed to give an understanding of the ongoing affordability of the loan to the Borrower.
Any outstanding debt
When assessing a Borrower’s loan application, it is important that we can quickly and clearly see any other borrowing the business currently has to help us assess loan affordability and creditworthiness. This also enables us to understand the needs of the company with regards to funding. If you have multiple loans there may be an opportunity to consolidate company debt into one loan, simplifying management of your finance and potentially reducing costs.
Other factors we take into account
Developing a strong relationship with our Borrowers is key to our credit assessment process. We take the time to get to know each business, the stakeholders and the requirements to give us a detailed understanding of the company’s ability to repay the loan.
We also take into account the Borrower’s circumstances when arranging security for each loan. The type of security we take is reflective of the company’s situation and the size of the loan requested to give both the Borrower and Investors peace of mind.
In all the loan assessments we carry out, we are looking for cash-flow in the business that indicates an ability to repay, proven management ability, a strong business plan, and positive industry indicators.
While the tips mentioned here are meant to give you guidance on applying for a small business loan, we encourage you to fill in an application even if you don’t have all of this information immediately available. Unlike banks, you will have the opportunity to speak directly to our Credit Team about your application and they will be happy to advise you on how best to proceed.
Find out more about writing a great Borrower pitch in this blog post.
Interested in learning more about getting a loan with LendingCrowd? Call us at 0131 564 1600 or email us today! We aim to make a decision within 48 hours of receiving an application.