Working capital, assessed on your numbers.
Unsecured money for a business is priced on how the cash actually moves, which means the quality of what you hand over changes the answer.
- Usual term
- 2 yearsFrom 3 months to 5 years, depending on what it is for
- Security
- NoneWhich is why the pricing is what it is
- Assessed on
- Cash flowStatements and financials, not a payslip
- When it is done
- Drawn downTo the business account
Say what it is for
"Working capital" on its own is the weakest thing you can write. Stock for a season repaid out of the takings, a deposit on a contract already signed, or bridging ninety-day terms on an invoice you are holding — each of those is a different risk and a credit officer reads them differently. The ones with a repayment source attached get answered faster.
What the bank reads
Your bank statements, mostly. Twelve months of them, read for the shape of the year rather than the balance today: how seasonal you are, how often you go into the overdraft and how quickly you come out, whether debit orders bounce, and whether the takings are growing. The financials give that context and the statements are the evidence.
This is where a lot of good businesses are turned down for presentation rather than substance. A seasonal business looks alarming on three months of statements and entirely reasonable on twelve.
Before you take unsecured money
If what you need is a machine, a vehicle or property, finance it against the thing itself. Secured money is materially cheaper and it leaves your facility free for the months when you need it. Unsecured business finance is for the things that have nothing behind them — stock, wages, a gap in the terms.
What you will need
Straight off the application's own checklist. The ticked ones are required; the rest are asked for only where they apply to you.
- ✓Twelve months of bank statementsThe business account, in the bank's own PDF rather than a screenshot.
- ✓Your latest financialsAnnual financial statements, or management accounts where the year end is far off.
- ✓Company documentsRegistration, and the IDs of the members or directors.
- ✓What it is for, and how it gets repaidA paragraph. The repayment source matters more than the amount.
- +Your tax clearanceWhere you have one. A SARS arrangement is better disclosed than discovered.
- +Signed contracts or ordersIf the money is against work you have already won, send the proof.
Questions
How long must the business have been trading?
Most lenders want twelve months of statements, because that is what they are assessing. Some will write earlier against a shorter term or a personal suretyship.
Will I have to sign personal surety?
For unsecured lending to a small company, usually yes. It is worth knowing that before you apply rather than at signature.
I am behind with SARS. Is that fatal?
Not necessarily, and an arrangement that you disclose reads very differently from one a lender finds. Say it up front and say what the arrangement is.
What rate should I expect?
Unsecured business finance is priced well above prime and the spread between lenders is wide — which is the argument for being in front of more than one of them with the same application.