Whilst we may all skim over the small print at times, if you are entering into a commercial finance agreement this is the one time that you should ensure that you know exactly what you are signing up for.

Although the borrowing is for business purposes, more often than not a lender is looking for personal guarantees from the business directors and potentially even second charges or debentures on personal property and assets.

Sometimes due to the complexity of commercial finance agreements and the situation of the borrower at the time the agreement is entered into, the borrower may only see the outcome of the large cash injection into the bank and choose to skim over the finer details.

The end goal of any lender is to get the money out of the door, within their own parameters and to fulfil their parameters. But as a borrower you need to ensure that you are fully aware of the risks associated to you both personally and professionally should the loan go into default.

Some key points to help borrowers assess a finance facility in more detail are:

  1. What term is the loan over? i.e How long do you have to pay it back?
  2. What are the interest charges on the loan and are these payable on a monthly basis (Serviced) or are they payable out of the loan funds (rolled up).
  3. What happens if a loan goes into default? Do the monthly charges increase for example from 1% to 3%?
  4. What security are you giving to the lender? Are you securing this facility win your business assets or are you being asked to use personal assets as security?
  5. What if you cannot repay the loan within the term agreement? What do you stand to lose?

If you have a finance agreement that you would like to review or there is something you are looking to sign up to but you are not sure what it means for you or your business, get in touch on 0161 763 5000 or complete this form http://blacksbusinessbrokers.fundbusiness.co.uk/

Smart businesses speak to a broker that can provide an independent review of the facilities available to the client and explain the options and risks associated with each.