Top business tips from a commercial finance broker
Starting or running a business can feel like an exciting adventure, but it also comes with its fair share of challenges.
From keeping track of finances to navigating legal rules and finding your first customers, there’s a lot to figure out.
The good news? No matter where you are in your business journey, there’s plenty of free support available to help you along the way.
We spoke to Joseph Babalola, Head of Cash flow lending at Funding Bay, to understand some of the key aspects of the service commercial brokers can provide to smaller businesses.
Keep reading to find out his answers to questions posed by businesses and be sure to watch our videos to learn more.
What does a commercial broker do?
“In simple terms, we match people who have money with people who are looking to borrow money,” says Joseph.
Brokers are finance professionals dedicated to helping businesses secure the best financial deals available.
Acting as intermediaries, they connect businesses with lenders, saving you the time and effort required for extensive comparisons.
Their expertise lies not only in understanding the varied financial products on the market, but also in maintaining established relationships with a wide network of banks and lenders, as Joseph says: “The type of people that we work with on the lending side are your standard high street banks, challenger banks, alternative lenders and very specialist niche lenders.”
These connections enable brokers to negotiate better rates and terms—deals that might otherwise be out of reach for the average business owner and its worth remembering that some lenders only work through brokers.
With the vast array of financing options available, navigating this complexity can be daunting, especially when trying to find the one that best suits your business or industry.
A broker’s in-depth knowledge of financial products and their access to exclusive lenders could streamline this process, ensuring you not only save time but also secure a solution tailored to your specific needs.
Joseph says, “In the current market conditions, there is a lot of demand for funding and our job is to make sure that people have access to the best possible finance that they need at the stage that they are at as a business.”
What are the most common financial products commercial brokers are approached to find?
Although brokers can support smaller businesses by helping them gain access to a large variety of different financial products, there are some products that, often due to their flexibility, could be a good solution for most business challenges, including:
- secured and unsecured loans
- Asset finance
- balance sheet products like invoice finance.
Despite this though, Joseph says that brokers will always take a ‘holistic approach’, working with a business to identify the type of financial product that best suits them and their circumstances.
You can learn more about the different types of financial products available to businesses with our Making Business Finance Work for You guide.
What paperwork do I need to support a funding application?
Any application for finance, will need to be supported by a substantial amount of evidence.
Brokers can help businesses looking for finance by working with them on preparing their application.
“We help tell your story to the lender, so that they can understand it, they can price you properly, and they can understand the level of risk that you can provide to them,” says Joseph.
To help them ‘tell the story’ of a business, brokers tend to ask for a number of different pieces of information before approaching a potential lender, including:
- Filed accounts – these should be the full accounts and not the abbreviated accounts filed with Companies House
- Bank statements – these can be very helpful to a broker as it gives them the opportunity to see the financial position of the business holistically over a set period of time, usually the past year
- Management accounts – Balance sheets and Profit and Loss accounts offer a view of the financial position of the business right now
- Cash flow forecasts – these documents can be helpful in illustrating why a business might need funding and what the benefit that funding could have for the business.
What impact does a bad credit score have on a loan application?
A business credit score operates in much the same way as a personal credit score and banks, lenders, and even investors rely on them when evaluating whether to offer financial support or funding.
Your credit score is especially important when you’re seeking debt finance such as a business loan, an overdraft, or other forms of credit.
Your business credit score influences several critical factors, including how much you’re eligible to borrow, the interest rate you’ll be offered, and whether your application gets approved in the first place.
These elements can significantly impact your business's financial planning and opportunities for growth.
Your business credit score is determined by several factors with one of the most significant influences being whether your business pays its bills on time.
This doesn’t just include utility bills but extends to invoices and payments to other creditors.
Consistently making late payments or missing them altogether can negatively impact the credit score of your business.
However, bill payments aren’t the only consideration.
Other contributing factors include how frequently you’ve applied for credit in the past, whether you’ve exceeded overdraft limits, and if you’ve filed your business accounts on time (when applicable).
Each of these elements plays a part in shaping your overall creditworthiness.
“The key thing is to be transparent with your broker,” says Joseph.
"They are on your side and quite frankly there is nothing you can say to us that we haven’t heard before.”
“It’s important to let us know what is going on, that way we can stay ahead of it with the lender and create a case that the lender can then lend to you.”
Even if the broker isn’t able to secure funding for a business due to a poor credit score, they may be able to offer guidance on how to go about improving it.
Top tip for smaller businesses from a broker: Plan ahead.
It’s often the case that most small business owners are so tied up dealing with the day-to-day pressures of running a business, that they aren’t able to devote enough time to planning ahead.
This could have negative effects on a business, especially when it comes to identifying when and why a business might need to seek external funding.
To help with this, refreshing your business plan as your business grows and the economy changes could be well worth your time.
By frequently revisiting and updating your plan, your business stays aligned with its goals and remains adaptable to change.
A key part of this process is holding regular meetings with key personnel from your business.
This ensures everyone is on the same page and contributes to the refinement of your plans.
Regularly measuring your performance against the objectives and targets set in your plan is a proactive way to stay on track.
This practice not only helps you achieve your goals but also reveals any areas where you might be going off course, enabling you to make necessary adjustments, and begin seeking external funding if you need it.
Many businesses find it effective to conduct these assessments every three to six months, as this interval provides enough data to analyse progress without losing momentum.
These reviews can also uncover high-growth opportunities where more resources might yield greater returns.
They also play a crucial role in fostering productive discussions with banks, investors, and even potential buyers, providing clear evidence of your business's performance and strategic direction.
For more information and guidance, visit British Business Bank's Business Guidance section and the Support and Guidance section on the Start Up Loans website.
Disclaimer: We make reasonable efforts to keep the content of this article up to date, but we do not guarantee or warrant (implied or otherwise) that it is current, accurate or complete. This article is intended for general information purposes only and does not constitute advice of any kind, including legal, financial, tax or other professional advice. You should always seek professional or specialist advice or support before doing anything on the basis of the content of this article.
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