Revenue based lending and borrowing for your business

SHARON COOK DIRECTOR OF CHOICE BUSINESS LOANS

Revenue based lending and borrowing for your business.

Iam delighted to have been invited to contribute to the Aspen Waite magazine. Unfortunately, my specialist subject is raising finance for businesses, rather than the food or cocktail section, which I imagine is extremely popular!

I have known Paul and Aspen Waite for several years and working with the Aspen Waite R&D team as many of my customers have benefitted from this service. We became closer during the pandemic, sharing knowledge and resources to help our businesses and customers navigate through this most difficult time. Our trust is built on solid ground. So here we are today, collaborating more closely than ever.

Firstly I would like to cover the Recovery Loan Scheme (RLS) with you. This is due to have a hard stop at the end of June 2022, with no mutterings of it being extended or replaced. However; three months is a long time, and this could change; but right now we must assume this will be the case.

RLS Headlines:

• Borrow up to £2 million

• Up to 6 years

• Under £250k there are no personal guarantees (PG’s), debentures that may be taken

• Over £250k partial PG’s will be requested, debentures could be asked for

• 70% of the capital of the loan is backed by the UK Government

• The money can be used for growth, asset purchase, recovery, diversity, acquisition to name a few

• Max. interest rate 14.99%

• All fees covered by the borrower

There are some stipulations, and each lender will choose how they wish to lend. Some will go on 25% of 2019 turnover, minus any CBILS loans. Others could look at the next 18 months liquidity requirement. In all cases the RLS can only be offered if the ‘business as usual’ product could not be offered or is more expensive! You can see it becomes complicated. But what this does mean is if you have been turned down by one lender it’s not the end of the quest as you may fit another lender’s different criteria.

In my experience, I would also suggest that you don’t leave your application too late; if the scheme is not renewed then lenders will not recapitalize towards the end of the program and that could leave fewer options for you.

As always, where there is adversity, there is success. Many businesses moved online and discovered that selling online really worked for them, giving them a wider audience. Luckily, it seems the buying habits of the public have not reverted but maintained a high level of online activity. We had many customers say,

‘if only I could buy more stock,

I could sell more’. One of the challenges we see is a significant time lag in the sales cycle. From paying suppliers, to stock being delivered and then finally making the sales, the cash cycle isn’t quick enough. When a business does not have enough money at bank to increase marketing expenditure and additional stock purchases, it’s a very slow and frustrating growth process and cash flow challenges may arise.

In the early days we had limited resources to help, but now we have numerous revenue based lenders join the market place to allow online sellers to cost effectively buy more stock to sell more! They also come with added value benefits.

For example, some offer inventory support to help online retailers source products, others offer sophisticated marketing analytics tools and access to Google and Facebook marketing teams. All free with this funding, which is now referred to as Revenue Based Lending! An incredible offering for any ambitious, growing online business. The best part is that there are a number of these lenders in the market, so the cost is being driven down.

It’s such an interesting space and we have found that lenders are coming in with very specific and varied offerings to try and beat their competition. Not only that but as it is all based around very visible and integrated online platforms, the level of security required by these lenders is scarily limited, in some cases none-what-so-ever! For example, no PG’s, no credit checks, no financials!

If you want to know more about the RLS, Revenue Based Lending or indeed, any borrowing for your business, please don’t hesitate to get in touch to discuss what can be done to help.

To get in touch with Sharon to learn more about Choice Business Loans, please email SharonCook@choicebusinessloans.co.uk