Get advice that's right on the money

Buying or operating a profitable licensed business is becoming tougher and tougher each year. The government heaps more red tape onto the business community and it's the smaller businesses that find it hardest to cope.

The good news, though, is that finance broking is finally coming of age. The National Association of Commercial Finance Brokers is 'growing teeth' and it is now getting to the stage where lenders will not take seriously a broker who is outside the association.

The percentage of commercial lending handled by brokers is growing annually, and this looks set to continue. Gone are the days when a bank could rely on our custom from the cradle to the grave. We are now consumers in an ever-growing market, and the high-street banks are having to run to catch up.

Your local bank manager will still be able to offer a very competitive deal in terms of interest rate, but using a professional broker offers a number of advantages.

Longer loan terms​

Cashflow is of far greater importance to a business than is credited. If the break-even point for your business can be reduced, even by only a small amount, then you have a greater likelihood of success, especially in the first months and years. Brokers have been able to negotiate longer loan terms - up to 30 years in some cases - as well as interest-only periods and payment holidays. These schemes mean your initial outlay will be significantly reduced, giving you the best possible start in your business life.

Lending for the future​

When a licensee aims to develop a business it is vital that a lender understands the impact of the development on future trade and is prepared to lend against the projected upturn. Brokers often include sums to improve the premises in the original funding application, enabling a client to make better use of their deposit.

Loan to value ​

Most licensees want to maximise their investment and get the best premises they can. This might mean accepting a higher interest rate but if the extra funding allows the purchaser to spend another 20 per cent on the business, in many cases the resulting extra income far outweighs the cost of additional borrowings.

No tie-ins​

By putting your eggs into separate baskets, other savings can be made. Traditional banks will try their best to tie a business in to accepting all their services, regardless of whether they offer the best value for money. These may well include current account banking, merchant services, buildings insurance and life assurance.

The experienced broker will be able to arrange funding without these add-ons being tied to the mortgage, and by having freedom of choice you will be able to make considerable savings on these services.

Discounts​

An experienced broker will be able to help a newcomer to the industry by introducing them to suppliers, specialist accountants and solicitors and by being able to give a good indication of anticipated discounts and charges.

Expertise in the market ​

There are relatively few bankers or brokers who really understand the licensed trade. An experienced broker should be able to assess the premises, understand the accounts and so on to assure you the business you are buying will be viable. A broker will also work with the other professionals to ensure the transaction goes smoothly and quickly.

Paul Thompson is a partner at broker Acorn Commercial Finance and has been a director of the National Association of Commercial Finance Brokers since 2002. You can find a list of NACFB members at www.nacfb.org​