Funding for loss-making businesses

If you’re loss making, you can still get a loan to help you achieve or return to profitability. When your last accounts show a loss, your options are limited, though it depends if you want an unsecured loan or secured loan.

A secured loan is just based on the property itself and so affordability isn’t an issue. Unsecured lenders on the other hand will assess the business based on cash flow and as a result, will look to lend around 1 month’s average turnover over a maximum term of 12 months. This would be for a revolving credit facility.

As you’re not making a profit, they will base their affordability mainly on the credit-worthiness of the Directors and business, as well as the cash flow in the bank statements. They will look to assess how much the business could afford in monthly repayments based on the cash available in the bank statements over the previous 6 months.

Unsecured business loan option

It is worth speaking to our of our experts as there are a few factors that unsecured business loan lenders will also take into account which may actually deem you profitable. We will be able to carry out a full assessment for you, however the following are some of the factors that they will take into consideration:

You may be showing a loss in your last filed accounts, but business may have improved since then. As a result, if you use accountancy software, it would be worth providing an up-to-date draft Profit & Loss and Balance Sheet from it to get an understanding of where the business is financially at this moment in time. If you’re currently showing a profit, then the lenders will take this into consideration.

Did you make a large one-off purchase? For example, if you bought a new premises, acquired another business, did a large refurbishment etc. and therefore your accounts show as a loss, make sure you tell us! We can build a story around your application for the lenders to ensure that they take this into account and to get you a competitive term loan.

Are you an asset-rich business? Some lenders will add the depreciation of your assets back onto your net profit. This could turn you from a loss making business to a profitable business.

Do you have upcoming contracts/ invoices? We can use these to add to the story to show what income you’ve got coming into the business and show that the business is heading in the right direction.

There are many ways we can look to identify the best options for you and so do get in touch so that we can thoroughly understand your business and ensure that you get the best finance possible.

Secured loan option

Being a loss making business is less of an issue when security is involved as there is less risk for the lender. As a result, we can look to get you a bridging loan where the lenders will look to offer you up to 70% of the value of your property (minus your outstanding mortgage) over a maximum term of 2 years. The key benefit to this is that there are no monthly repayments which can help ease cash flow significantly and get the business bank on track.

Please refer to our bridging loan page for more details.

How much will it cost?

For the unsecured revolving credit facility option, it will typically cost between 2-4%/ month but with the added flexibility that you only pay for the outstanding amount and you can pay back the loan at any time and at no cost (including over-repayments). You also only pay for the interest accrued.

You could therefore use this short term loan to get back to profitability by purchasing more stock, starting a new contract, increasing your marketing spend and then once you’re in a profitable position, we can then look to refinance the loan (possibly get you a higher amount) with a unsecured business loan spread over 5 years.

Other options for a loss-making business

If you have outstanding invoices, we can get you an invoice finance facility that will pay up to 85% of your invoices upfront, releasing cash into your business. This also doesn’t have to be an ongoing facility as we could just finance some specific invoices for you.

If you take card payments, then we could look to get you a merchant cash advance for 1-2 months’ worth of your average monthly card payments and the best part about this product is that you only repay a percentage of your card takings. Therefore, if you don’t make many sales, your monthly repayment will be lower as you just repay a percentage of the sales generated for that month.

To find the best solution for you, give us a call to discuss all your available options.