What We do
Services
Here at Yorvik Business Finance, we’re proud to offer a huge number of financing options, including business loans, invoice financing, working capital loans, and much more. The below goes into some detail of what our services are, and how they can help you.
Business Loans
How To Get The Right Loan for Your Business
Business loans are designed for commercial organisations, rather than a specific individual. With a business loan, you could:
- Borrow between £1,000 and £3,000,000
- Pay the loan back over 1 month to 15 years
Business loans fall into two categories:
Unsecured – these loans allow your business to borrow money without the risk of using your business/personal assets as security
Secured – these loans let your business borrow money using an asset as security. Any business asset can be used, or you can often use personal property as an asset as well. If you do not pay the loan back, the lender can sell any assets provided to claim their money back.
You can use business loans for almost any purpose, as long as it is business related.
Asset Finance
Equipment Leasing
Equipment leasing can be an effective way to access expensive items that your business needs to flourish. Leasing is essentially a method of renting an asset for a period of time — it’s not permanent, and it can help many businesses get to the next level.
Hire Purchase
Hire purchase is a way to buy assets by paying in instalments over time. With hire purchase, you legally own the item once all the installments have been paid, but in certain agreements it will appear on your balance sheet at the start of the term.
Asset Refinance
For example:
Joe’s construction firm has a piece of machinery worth £10,000. He got it on a hire purchase agreement, and only has £1,000 left to pay. That means he has £9,000 of equity in the item. In other words, Joe’s company owns nine-tenths of the machinery, and the hire purchase provider owns the remaining tenth.
In this situation, provided it’s the right kind of equipment, Joe could refinance his company’s machinery up to the value of about £6,000 (so 70% of the item’s overall value). Therefore, the refinance lender would pay the hire purchase firm the remaining value of £1,000, take the charge over the asset, and lend Joe £6,000 based on its value.
Property Finance
There are a number of options when it comes to property finance.
See below for a breakdown of all available options
BTL/Commercial Mortgages
A commercial mortgage is a loan that is secured against a property which is not currently owned by you.
When it comes to a commercial mortgage there are no set rates. This means that every single application that is submitted to a lender is reviewed thoroughly as they look into the risk levels.
On average, a commercial mortgage will last from 3 to 25 years – if you are in the market for a shorter-term working capital loan then you might need to look at a bridging or development loan.
A larger loan with a lower risk will always receive the best rates. Lenders will often have a risk profile that they will go through when processing an application.
Commercial mortgages are aimed at businesses that are looking to purchase a property or to release value from an existing building which could then be invested into the business via a working capital loan.
When applying for a commercial mortgage, the usual documents needed will include profit/loss statements, tax returns, rent roll, and photos of the property, a personal finance statement and summaries of capital improvements.
If you have adverse credit then you can still obtain a commercial mortgage – however, due to your credit score, it will be harder to acquire the loan. In some circumstances, you will have to apply to a specialist adverse credit commercial mortgage lender.
Bridging Loans
Bridging loans can be arranged within a matter of hours with funds released within 72 hours although it can sometimes take up to a week to complete. A bridging loan may be arranged much quicker than could be achieved through a traditional bank. However, most bridging finance companies still apply sensible and relatively conservative lending criteria. Usually such lenders are smaller nimble operations and specialise in doing all of the usual checks that a bank will do but without the encumbrance of bank bureaucracy.
The term of the loan can be as short as one day usually up to a maximum of 18 months. Loan amounts generally start at around £25,000 with no maximum, but these are usually capped at 80% LTV of the property.
Short-term finance is always more expensive than longer term lending; however, with more and more lenders entering the market it is competitively priced. The interest rate charged will depend very much on the proposition in question; however, current rates range from 0.7-1.5% per month, potentially with even higher rates on more difficult propositions.
However with many different lenders in the market there is a wide variety of charging structures so, in addition to the interest rate borrowers may pay a variety of other fees to the lender – arrangement and exit fees, surveyor fees and legal fees.
Why Use a Bridging Loan?
The main reasons to use bridging loans are:
- Raising finance quickly
- Refurbishing a property
- Finishing a development
- Buying at auction
- Purchasing property that would not secure a mortgage in its existing condition with a mainstream lender
- Bridging a shortfall of funding between buying and selling property when a sale is delayed
- Raising a deposit for purchasing property
Development Finance
Property development finance is a short-term loan for residential property developments, such as refurbishment projects or construction. This is usually based on gross development value (i.e. what will the site be worth when the refurbishment or construction project is finished) that is then paid back in stages.
An example of ground up development finance:
A plot of land with planning permission to build four, three bed detached houses. The land can be purchased for £250,000 and the cost to build all four houses will be £400,000.
The estimated value of each house is £250,000 meaning a Gross Development Value (GDV) of (4 x £250,000) £1,000,000.
Development finance can be used to raise up to 70% of the land cost = £175,000 and all of the build cost.
Therefore, a facility would be set up for £575,000 (net). The initial release would be for £175,000 and used to help fund the purchase of the land.
The remaining £400,000 will be released in stages as the build progresses.
With most facilities interest is only charged on funds that have been drawn.
Invoice Finance
Invoice Finance providers use unpaid invoices as security for funding and approved businesses can access up to 95% of an invoice’s value. This is usually accessible within 24 hours. Invoice Finance is a great solution for challenges with cashflow or as an alternative to working capital loans
The amount of funding given is based on the risk criteria of the Invoice Finance provider. However it allows businesses to access finance for cashflow or investment purposes using an often-untapped asset on its balance sheet.
Invoice Finance is growing in popularity among UK SMEs, particularly those with long cash collection cycles like manufacturing, retail and transport.There are three main types of Invoice Finance:
Factoring
Factoring allows businesses to generate money against unpaid invoices. The finance provider will lend you up to 95% of the value of your invoices. It will also manage your sales ledger and collect payment for your invoices direct from your customers. They will then deduct the costs of the factoring service, before paying you the remaining balance.
Discounting
Invoice Discounting works in a similar way to Factoring but the business keeps control of customer payments. Your business pays a fee and a ‘discount charge’ (similar to interest) if the funding is used, in a similar way to a standard Overdraft.
Single Invoice Finance
If you don’t want to put your entire sales ledger through an Invoice Finance lender, you can manually pick which invoices you want to fund. This would typically be if you have one specific client on longer payment terms than others and don’t want to wait the full term before receiving funds. Single invoicing is often more expensive than the aforementioned options, but does give you flexibility on the overall costs when using invoice finance.
Revolving Credit Facilities and Merchant Cash Advances
Revolving Credit Facilities
A revolving loan facility is a form of credit issued by a lender that provides the borrower with the ability to draw down or withdraw, repay, and withdraw again. These facilities are considered one of the most flexible financing arrangements due to their repayment and re-borrowing accommodations. This is just like a business overdraft facility.
It is not considered a working capital loan because, during an allotted period of time, the facility allows the borrower to repay the facility and use it again, without having to reapply. The majority of lenders will review the facility every 12 months but you are able to request a larger facility if required during this period.
Merchant Cash Advances
Merchant cash advance lenders provide funds to businesses in exchange for a percentage of the businesses’ daily debit/credit card income. This comes directly from the processor that clears and settles the credit card payment.
A company’s remittances are drawn from customers’ debit and credit-card purchases on a daily basis until the advance amount has been repaid in full (with interest).
Most lenders have partnerships with payment processors and then take a fixed percentage of a merchant’s future debit/credit card sales (ranging from 5% to 20%).
The majority of clients who use MCA’s are retail shops, pubs and restaurants – any business where the majority of their revenue is received via card transactions.
Trade Finance
The term ‘trade finance’ refers to all the different instruments and products that allow you to trade internationally.
Trade finance services bridge the financial gap between the importers and exporters, adding a third party to the mix and, in doing so, reducing risk and making it easier to trade.
The phrase is an umbrella term, meaning it covers many different financial products that lenders use to make trade transactions feasible. It covers activities such as issuing letters of credit, as well as lending and forfaiting – all of which we’ll discuss below.
The different parties involved in trade finance include banks, trade finance companies, importers and exporters, insurers, export credit agencies.
Examples of Trade Finance
Some examples of trade finance products and services used by these parties include:
A letter of credit. This is where an importer’s bank makes a promise to the exporter that it will immediately make the payment once the transaction has been completed.
A bank guarantee. When a bank acts as a guarantor in case the importer or exporter fails to fulfil the terms and conditions of the contract. This means the bank would pay a sum of money to the beneficiary.
Factoring. Here, an exporter sells their invoices to a trade financer (the factor) at a discount. The factor then sells it on to the importer, who pays the full price for the product.
Forfaiting. This is when an exporter sells all of their accounts to a forfaiter at a discount in exchange for cash.
Insurance. This can be used for shipping and the delivery of goods.
Lending. Lending lines of credit can be issued by banks or other providers to help both importers and exporters.
Export credit. This can be supplied to exporters as working capital.
Want to know more about us?
Whether you know exactly what type of financing or business loan you’d like, or you’d like to chat about it, we’re here to help. You can get in touch straight away using our contact page, or click the button below to learn more about us as a business. If you want to keep up with the latest from us, visit our LinkedIn.
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