When a business is looking for commercial funding, they usually want to address a specific need. While these needs can often be categorised into types (such as growth finance, turnaround finance, cash flow etc.), the exact requirement will never be the same between applicants.
Businesses will have different funding gaps they are looking to fill, with varying eligibility and preferences that must be considered. This makes the process of seeking finance complex and multi-faceted. It also means there’s rarely a ‘one size fits all’ solution.
It is crucial to have tailored financial products that meet the criteria a business is asking for, enabling them to adequately solve their issues and granting better access to funding. This is where specialist lending helps.
This guide explores specialist funding in more depth, including the support it can offer companies in the long term.
- What is specialist lending?
- Benefits of specialised lending
- What you need to consider
- How to access specialist lending
What is specialist lending?
Most high street banks will underwrite their loans in a very similar manner, so every recipient is subject to the same eligibility criteria as well as standard terms and conditions. However, a specialist lender (those outside of high street banks) will take a more bespoke approach in which the underwriting is tailored to the needs of the applicant.
In this sense, specialist lending better understands and incorporates those seeking finance’s unique financial and business situations. It looks at every business separately, providing solutions suited to their needs rather than grouping them by the type of lending they are seeking.
Beyond this, specialist lending does not dramatically differ from any other kind of lending. Any business applying for funding will still undergo the same checks to ensure eligibility, and specific terms may apply, although the criteria will vary. These terms are more likely to better match the applicant’s characteristics and what they can commit to.
Benefits of specialised lending
There are many benefits associated with specialist lending.
Firstly, it allows more businesses to get the funding they need, rather than struggling to fit in with the standard products offered in the financial market. With 59% of SMEs experiencing a gap in external finance, ensuring suitable options is essential to promote greater access to funding and enable more businesses to reach their goals.
Specialist lending also places more flexible solutions onto the market, with a broader range of criteria. This means SMEs stand a better chance of being approved – even those who have previously struggled with traditional loans or have complex situations that increase their risk level.
Specialist brokers will also typically have access to a more comprehensive selection of financial products, further extending the choice available to SMEs who choose to utilise their services.
With more possibilities for funding, more businesses will achieve their ambitions. It allows companies to overcome barriers and survive financially challenging times. In this sense, specialist lending fuels growth and encourages resilience – which is crucial for the longevity of any business.
What you need to consider
Like any form of finance, there are careful considerations to make before diving into specialist lending. This will enable you to ensure you’re making the best choice for your business.
Firstly, specialist lending will often require additional fees. Unlike going directly to a bank, you will typically need to work with a broker or advisor to discuss your needs and put together a package that works. This service will likely come with a cost. However, it should more than pay for itself as it allows you to get a better and more suitable deal.
Some specialist products may carry a higher interest rate. This is due to the lender undertaking a higher risk in funding the application due to their criteria.
When applying for specialist lending, you must be transparent about your circumstances, even if they seem less than ideal. This allows you to find a solution that truly works for your needs.
The application processes are becoming more and more sophisticated and typically any dishonesty in the application process will be picked up, either now or in the future with the resulting consequences of legal action.
How to access specialist lending
If you believe specialist lending could be a good fit for your business, these are the steps you need to take to access it.
- Find a specialist lender or broker. The first step is setting up a meeting with a specialist advisor or broker. Most advisors and brokers will offer a free initial consultation, so you can determine if the process is for you first.
- Prepare financial evidence about your business. A lender will ask for supporting evidence to identify the best solution for your requirements and eligibility. This includes items such as management accounts, bank statements, VAT returns, financial forecasts, etc. By having these prepared in advance, you stand a better chance at finding a perfect fit for your needs and being accepted for funding.
- Discuss your needs. A specialist lender must understand your business’s circumstances and what you want to achieve through funding. During your first consultation with your advisor, you should spend time going over this and be completely transparent to develop this understanding fully.
- Consider your options. Once you have gone over your situation, they should identify an appropriate route forward. This could include putting in applications on your behalf or arranging a loan to be underwritten as per your criteria.
Conclusion
In a world where the funding needs of businesses have become more diverse and complex, there must be flexible support options available. With this, more SMEs will access the finance they need to meet their objectives, grow their operations and become resilient.
Specialist lending is a solution to this issue. Offering bespoke loans that take the unique circumstances of a business into account provides people with precisely the support they need and in keeping with their eligibility criteria.
As a result, many rewards can be accessed – most crucially, allowing more companies to get funding and use it for the longevity of their business while reducing pressure on their finances.
We work with you to understand your unique needs and find financial solutions that meet your objectives. We then put you in touch with specialist lenders that suit your business requirements.