In business, simply put, lower outgoings mean higher profit which is what we all strive for. Finance is no different, the lower your monthly payment the greater the saving, the higher profit you will see from a new machine or on a contract. When entering into an agreement, there are many moving parts such as your financials, agreement structure, the supplier, the broker you work with and timescales. Each of these has a bearing on the rates you will obtain and ultimately the impact this will have on your business’ bottom line. It’s important to consider each of the variable factors and how these can be controlled to optimising the rate you are being offered!
Financials
The business’ financials will have a significant bearing on the rates available to you. This is because this will dictate how risky the finance is deemed and a higher risk results in a higher rate!
Accounts that show a business is profitable with positive trends year on year will benefit from the most competitive rates, as the lend is lower risk.
If your latest accounts show a loss, then financials since the filed accounts will always help if showing improvements.
Agreement Structure
The agreement structure refers to the term and whether or not a deposit is being provided. When deciding what term to opt for, in most cases there will be no difference in the underlying rate from the funder, however whilst a longer term will mean a lower payment, the overall interest payable will be higher. It is therefore sensible to look at the costs across the entire agreement to maximise profits for the term.
Whilst deposits will reduce the monthly payments, there are scenarios where a deposit may actually increase the rate you pay. For example, if you were looking to fund a piece of equipment for £50,000 but opted to put down a deposit of 10%, the deposit would take you to a higher rate banding <£50k. We would always suggest asking for a number of illustrations so you can compare the options and find the best solution for your business.
The Supplier
If you choose a supplier that is happy with payment after delivery of the goods, you may find that the rate is more competitive than those who ask for more complex payment structure.
This is because stage payments require more administration and only a limited number of funders offer this as a product.
By negotiating with your supplier to obtain more favourable payment terms you are likely to see the benefits in the form of a lower rate.
The Broker
Whilst most brokers have access to a similar pool of funders, the knowledge and expertise of the individual broker is paramount to obtaining the lowest rate possible.
At Focus we have an industry leading conversion rate when it comes to deals approved, due to our ability to present applications in such a way to maximise the appetite of the more competitive funders.
Timescales
By planning ahead you can really save some money, as the most competitive funders have far longer turn around times than those slightly more expensive. Planning ahead means you have time on your side to benefit from the more competitive rates.
Communication
Time is everyone’s scarcest resource and as a result, it really is money! By communicating with your broker to keep them updated as to timescales for decisions, documents being signed etc. you save wasted time all round enabling margins to be kept finer.
Honesty also pays dividends, whether that be about your financial situation or the fact you are speaking to another broker, transparency is key when building long-term relationships and achieving the best rate.
We appreciate things don’t always go to plan and that sometimes unforeseen circumstances mean there is an urgent requirement or another broker couldn’t help so you are back to square one, and we will always do our best to expedite these scenarios. Where possible, following the above will ensure that you offered the lowest rates available, helping you to save money and still grow your business!