When you need cash to fund your next business venture, your first concern is whether or not you can secure a loan.
What gets overlooked, though, is how long it will take. Waiting on cumbersome financial institutions to grant credit can result in missed opportunities.
Here’s a look at how property-backed finance stacks up against traditional business loans.
Fast Access to Finance Is Vital To Your Business
During tough economic times, agility is critical to success. Being able to respond to demand quickly and, in turn, help your customers to be more profitable puts your business in the lead.
When your next big deal hinges on capital equipment or a large order of supplies, how long can you afford to wait to get your hands on cash?
Why Big Lenders Take Longer to Grant Loans
Big businesses have loads of procedures and long chains of command that make them sluggish. That’s great news when you’re competing against big business. It’s awful when you’re relying on a big lender to grant funds.
The same factors that make large corporates slow are what holds commercial banks up with granting your loan. Their red-tape draws out procedures.
Reports from South Africa’s Small Enterprise Development Agency (SEDA) suggest that it can take up to eight weeks to process a loan application. Approved loans can take a further three months before monies are released.
Commercial banks require specific evidence (that can take a while to gather) before they will even consider a loan application. This is a tiresome exercise on any business, but, if a business is seen as a high lending risk, then they face even more scrutiny.
Here is a look at the usual minimum qualifying criteria that small businesses need to meet for a commercial bank loan application.
- The business owner must be a South African citizen residing in South Africa.
- The majority shareholders should be directly (if not entirely) involved in daily business operations.
- The business owner’s skill should be relevant to the sector in which the business operates.
- Able to supply a well-researched business plan.
- Able to supply realistic cash flow forecasts and historical financials to prove profitability. This could entail:
- Business financial statements (usually two years’ worth)
- Two years of business tax returns
- Bank statements
- Financial projections
- A customer list
- Executive summary of the business
- Specifying the exact amount required, how it will be used, what returns you are expecting and when you will see those returns.
Your ability to prepare the evidence promptly and professionally affects how your business is perceived by the lenders. However, you can’t rely on this alone. Lenders are assessing risk, so they ultimately rely on the numbers. Despite the gruelling application process, your loan may still be rejected.
How Can You Raise The Working Capital You Need Faster?
If your credit history poses a threat to your ability to secure a term loan, then you can look at asset-backed finance instead.
Asset-backed finance uses your assets as collateral to secure a loan. There are different assets you can use to gain the business funding you need such as Debtor finance which uses your debtor’s book to access funds from your accounts payable ahead of the due date on your invoices.
When you need a larger lump sum or require a revolving credit facility, then property backed finance is a better-suited alternative.
The lender considers the value of the collateral to grant the loan. As the surety is tangible and readily available, the turnaround time for loan approval is much shorter. Asset-backed lenders are also able to give more flexible terms tailored to small business needs.
Property Backed Finance
A property backed loan is trade finance loan facility that provides a secured business loan using your residential, commercial, or prime industrial property as a guarantee. This means that you can access larger amounts than a conventional non-secured loan.
There are fewer qualifying criteria which drastically shortens the application process:
- A loan amount of no less than R500 000.
- At least one year’s audited business financials
- Cash flow forecast for the next 12 months that show that the business can afford the loan or revolving credit facility.
- Valid proof of ownership of private or commercial property.
How soon can I access funds from a property backed loan?
As little as 8 weeks. That’s right! Once you qualify for a property backed loan, the approval process takes as long as it would to register a bond on your property.
Our in-house transferring attorneys oversee the entire process further reducing time and hassles. As soon as the bond is registered, the full loan value will then be made available, or a revolving facility will be established.
Eliminate uncertainty, delays and unnecessary stress
You can’t afford to wait more than five months to get your hands on cash. You need a finance partner that’s as nimble as you are.
That is where Transaction Capital Business Solutions makes all the difference. We’ve been supporting business with access to funds for their sustainability and critical strategic growth for over 60 years.