When it comes to securing commercial finance in the UK, businesses need to understand what factors lenders consider when evaluating their application. While different lenders may have their own specific criteria, here are some key factors that commercial lenders typically look at when deciding whether to lend to UK businesses.

Business credit score:

A business’s credit score is a critical factor that lenders consider when evaluating an application for finance. A good credit score demonstrates that the business has a history of responsible financial management and is more likely to repay the loan on time.

Financial statements:

Lenders typically ask for financial statements and accounts. These include up to date management information, balance sheets, P&L accounts and even cash flow statements. These statements provide lenders with a detailed overview of the business’s financial health, including revenue, expenses, assets, and liabilities.

Security:

Lenders may require a form of security for the loan. Types of security can include property, equipment, or vehicles. If the business is unable to repay the loan, the lender may seize the asset to recover their losses.

Business plan:

A well-prepared business plan can be a crucial factor in securing commercial finance. The plan should outline the business’s goals, strategies, and financial projections, demonstrating that the business has a clear plan for growth and profitability.

Industry and market trends:

Lenders may also consider the industry and market trends that the business operates in. For example, if the industry is highly competitive or experiencing a downturn, lenders may view the business as higher risk.

Personal credit score and homeowner status:

In addition to the business credit score, lenders may also look at the personal credit score of the business owners or directors. This is because they want to ensure that the individuals responsible for the business are financially responsible and have a history of making timely payments. Being a homeowner also shows credit worthiness and can even be used a security for the loan

In conclusion, there are several key factors that commercial lenders consider when deciding whether to lend to UK businesses. To increase their chances of securing finance, businesses should aim to have a strong credit history, well-prepared financial statements, a solid business plan, and acceptable security where possible. They should also stay up to date with industry trends and work to maintain a good personal credit score. Working with a commercial finance broker can also help businesses navigate the application process and find lenders that are a good fit for their specific needs.