Short term business loans
Discussion
Mods this is a business question really so please do not move to Finance
A group of us started a limited company last year. We will be posting our first set of accounts to Companies House in the next fortnight. Our business is consulting around regulatory compliance.
Two of our customers have been awarded Government grants and we have agreed projects with them. The terms of the grant is that we invoice them during February 2025, they claim and get paid by the grant, and pay us. The work can go on beyond February though.
For cash flow, we want to start work immediately and not wait until February/March to get paid. We need to draw earnings for staff before that. I am thinking we should seek a short term loan, potentially to the full value of the grants. That is £60k.
I would welcome experience, advice, opinions on what type of product we should be looking for e.g. British Business Bank, Funding Circle. It's a new situation for us a young start up.
Many thanks.
A group of us started a limited company last year. We will be posting our first set of accounts to Companies House in the next fortnight. Our business is consulting around regulatory compliance.
Two of our customers have been awarded Government grants and we have agreed projects with them. The terms of the grant is that we invoice them during February 2025, they claim and get paid by the grant, and pay us. The work can go on beyond February though.
For cash flow, we want to start work immediately and not wait until February/March to get paid. We need to draw earnings for staff before that. I am thinking we should seek a short term loan, potentially to the full value of the grants. That is £60k.
I would welcome experience, advice, opinions on what type of product we should be looking for e.g. British Business Bank, Funding Circle. It's a new situation for us a young start up.
Many thanks.
Edited by TUS373 on Saturday 30th November 11:53
I recently took out a £10k loan with Funding Circle to buy some new IT gear.
The process was easy. Rate was competitive. Online application. Someone called within minutes of the application being submitted to run through a few things and the money was in the account four days after the application. We can settle the loan at any time without penalty.
The one thing I'd flag is to make 100% certain your client has had the grant approved before you take out and start using the loan.
The process was easy. Rate was competitive. Online application. Someone called within minutes of the application being submitted to run through a few things and the money was in the account four days after the application. We can settle the loan at any time without penalty.
The one thing I'd flag is to make 100% certain your client has had the grant approved before you take out and start using the loan.
StevieBee said:
I recently took out a £10k loan with Funding Circle to buy some new IT gear.
The process was easy. Rate was competitive. Online application. Someone called within minutes of the application being submitted to run through a few things and the money was in the account four days after the application. We can settle the loan at any time without penalty.
The one thing I'd flag is to make 100% certain your client has had the grant approved before you take out and start using the loan.
Same, had to pay it back over 3 monthsThe process was easy. Rate was competitive. Online application. Someone called within minutes of the application being submitted to run through a few things and the money was in the account four days after the application. We can settle the loan at any time without penalty.
The one thing I'd flag is to make 100% certain your client has had the grant approved before you take out and start using the loan.
StevieBee said:
The one thing I'd flag is to make 100% certain your client has had the grant approved before you take out and start using the loan.
This. Plus, make sure it's agreed (in writing) that you doing the work, and them paying you are not contingent on them getting the grant.TUS373 said:
Thanks everyone. The clients should have formal offer letters by 20th December. Now obviously it makes business sense to have those in hand plus executed contracts for service.
Will Funding Circle etc need these before they would arrange/grant loan to our company?
Funding circle will also want PGs from the directors.Will Funding Circle etc need these before they would arrange/grant loan to our company?
I'm also not sure they will do such a new business. Will be interested to see if people have experience of this as I do some stuff with start ups and that would be good to know.
TUS373 said:
We incorporated March 2023. Would be interested to know what information we would need to provide if anyone does have experience.
Never done a guarantee before either.
It was around 2017 but we did a funding circle loan to pay for part of an acquisition Never done a guarantee before either.
They basically went through the bank statements with a fine tooth comb and insisted on PGs.
They say they offer loans for businesses that have been trading for more than 12 months.
TUS373 said:
Thanks everyone. The clients should have formal offer letters by 20th December. Now obviously it makes business sense to have those in hand plus executed contracts for service.
Will Funding Circle etc need these before they would arrange/grant loan to our company?
It's very likely.Will Funding Circle etc need these before they would arrange/grant loan to our company?
I had to provide evidence of purchase orders and contracts that I have in place with clients.
TUS373 said:
The terms of the grant is that we invoice them during February 2025, they claim and get paid by the grant, and pay us
TUS373 said:
For cash flow, we want to start work immediately and not wait until February/March to get paid.
Apologies if this is stating the bleeding obvious but if you are not actually invoicing them until February and off the back of that they then confirm to the Government grant people they have been invoiced and then get paid the grant before then paying you, don't expect to see the money in February OR March.Have that in mind if you are looking at terms for a bridging loan.
Shouldn't it be your clients who are having to take out loans to raise the finance if they want you to start work before their grant comes through?
What happens if your take a loan, pay your staff/costs for 3 months and they something falls through?
You'll be stuck with a £60k loan which will likely have some big penalties/interest if not repaid as per the original terms, backed by PGs so they can come after you not just your new business...
Tread very carefully!
What happens if your take a loan, pay your staff/costs for 3 months and they something falls through?
You'll be stuck with a £60k loan which will likely have some big penalties/interest if not repaid as per the original terms, backed by PGs so they can come after you not just your new business...
Tread very carefully!
Thanks again everyone. Valid points made.
Since I posted, we are up to £90k of work which is great for us. I think if we financed £40k of that it would give us enough working capital until we get paid. If we asked for some payment before starting work, our clients may not be able to afford it themselves. It is normal to pay after completion or monthly milestones rather than before. It puts risk on us but with good reward, so I guess that is business.
I will speak to our accountant for advice too as there are a number of things to factor in.
Many thanks.
Since I posted, we are up to £90k of work which is great for us. I think if we financed £40k of that it would give us enough working capital until we get paid. If we asked for some payment before starting work, our clients may not be able to afford it themselves. It is normal to pay after completion or monthly milestones rather than before. It puts risk on us but with good reward, so I guess that is business.
I will speak to our accountant for advice too as there are a number of things to factor in.
Many thanks.
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