Business loans and financial backing more generally are very often absolutely essential to the prospects of a fledgling company or any enterprise aiming to grow or move on to a new phase of development.

The market for business loans however has changed dramatically in recent years as banks, which once dominated the scene almost entirely, have shrunk away from the lending arena to leave alternative funding options emerging apace to meet rising demand and the needs of SMEs.

Conrad Ford, founder of Funding Options, offers up some tips on how to get a business loan and how best to prepare to deal with the lenders.

1. Consider all the options

Contemporary businesses looking for loans should not only be looking in the direction of the familiar banking groups who might once have been seen as the only possible route to finance. In fact, it’s crucial for small business operators to have an open mind and to consider the full range of funding options and loan facilities that are now available.

While the retreat of mainstream banks from the realms of SME lending has made life rather more difficult for small companies in general terms, the good news is that emerging alternative lenders often offer more specialist services.

2. Don’t be fooled by headline figures

The reality of the business loan market at present is that lenders know there is strong demand for any credit facilities they are in a position to offer. That isn’t to say that there are no options available to businesses looking for suitable terms, but only to warn against expecting too much in terms of borrowing money at low interest rates.

Headline interest rate figures on business loans are designed to stand out as eye-catching offers but they don’t necessarily tell the whole of the story.

It could be that what seems to be a great deal does not stack up or suit your company’s needs. So it’s important not to be lured into agreeing a funding arrangement purely on the strength of a fetching headline figure.

3. Leverage your existing assets

Without taking any undue risks, it can be worthwhile and ultimately very beneficial for a company to leverage certain existing assets in order to free up funds for future investment.

One key asset class that often goes overlooked in this context is invoices, which can be sold for a price before they have been settled by your customers.

Invoice factoring and discounting are both growing in prevalence and they provide small companies with important routes to finance when cash flow problems are in danger of becoming critical concerns.

4. Be honest with potential lenders

There is little to be gained from hiding the truth about the financial history of your organisation as you approach the process of applying for a loan of any kind.

Company credit reports ensure that key information about your business is available to relevant parties upon request and lying about or covering any issues should not be considered as an option. It is far better to be upfront and honest with potential lenders and to figure out what options are available to your company as it stands, not as you’d prefer it to be.

5. Get the right advice at key moments

There are times when a company and its leaders are obliged to go it alone and rely on their own ingenuity and situation management skills but the process of applying for a business loan needn’t be one of them.

In fact, it can make a big difference to your chances of getting the kind of loan deal you want if you are able to access advice from relevant specialists at the right moments.

The ever-changing nature of the business loans market at present makes it perhaps more important than ever for companies to bring in third-party experts to help steer and inform the loan application and analysis process.

All you’ll really need is a thorough explanation of all the options available but without expert knowledge it can be very difficult to properly balance and assess the pros and cons in each case.

To kick off their company, Country Bumpkin Yurts, Jenny Lyon and Lara Collis needed some funding. Jenny explains how she and Lara approached their choice.

Lara and I first started realising we could make Country Bumpkin Yurts a reality when we were discussing how much we enjoyed camping and would love to start our own business.

We quickly become conscious of how much capital we would need to launch the business and that’s when we considered loan funding. We signed up for the Northamptonshire Enterprise Partnership (NEP) – a programme which works with local businesses.

“We did check many high street banks, but none offered the same support”

I would highly recommend signing up to your Local Enterprise Partnership (LEP) as it offers expert advice. The NEP suggested Enterprise Loans and after doing our own extensive research we decided that they would be the best fit.

This decision was based on a number of factors. As well as a loan, Enterprise Loans offered support, guidance and advice throughout the application. We did check many high street banks, including the one we hold an account with, but none offered the same support that Enterprise Loans did.

Thanks to our loan funding, which was through Enterprise Loans East Midlands’ (ELEM) funding streams and Start-Up Loans, we launched Country Bumpkin Yurts. Also, thanks to the additional business advice, we have manageable re-payments so we’ve had a great first year in business.

We had a really positive loan funding experience but there can be challenges. My top tips for any small businesses or start-ups considering funding would be to join your local LEP, look at as many different options as possible and when looking at funding streams and make sure you have a healthy contingency budget for repayments.

Looking for finance? SmallBusiness.co.uk is working in partnership with trusted lenders to help you find the best business funding deals. Find out more here.