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Poor Credit But Still Need Business Finance? Are You a Homeowner? Consider a Charge Deal

Guest post by: Al Shea

Article Overview: This article discusses the other options available to you should your business need finance, but for whatever reason you don't have good credit, or you're a brand new start business and require a large sum of money for new assets. Typically known as a charge deal, the funder takes a second charge over your freehold property against the asset they are funding.

Poor Credit But Still Need Business Finance? Are You a Homeowner? Consider a Charge Deal

Finance business assets using a second charge over freehold.

Various more specialist funders offer flexible funding options for new start businesses needing a large sum of money to acquire new assets. As most funders underwrite the based on the balance sheet of the lessee, it can be impossible to assess risk if the client hasn't enough posted their first set of accounts. The fact remains that they still need their equipment to proceed, so that is where a charge deal can work very well.

A charge deal basically involves the funder taking a partial charge over a freehold owned by the lessee. This can be a commercial property or a domestic property, either way the lessee should have a good level of equity available in the property they are offering a charge over to make it more appealing to the funder (if there is not sufficient equity available the funder will not write the business because they wouldn't have a large enough stake to fall back on should the lessee stop paying). Through offering a charge over the property it gives the funder security that they otherwise would not have had simply by getting directors guarantees, and as it is a new start business it is classed as high risk and therefore the funder needs their security in order to lend.

By offering a charge, the rates can sometimes be much cheaper than those associated with new start businesses (due to risk), and as result can save the business owner large sums of money by not having such a high interest rate on the loan.

Should the lessee stop their payments and go into default however, the funder may look to action their charge - this means they will look to realise their stake in the freehold they have a charge over in order to make their money back on what may have been previously lost. This also means that the lessee loses their freehold, so the lessee should only really look to do a charge deal if they are 100% confident in their business suceeding. Charge deals are very useful for raising larger sums of money for business equipment though if you have no other options and do not wish to go down the venture capital avenue.

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Article Tags: assets, brand new start, business finance, business need, freehold property, funder, poor credit, start business, sum of money



Related Forum Posts
Offer Credit instead - I'm not sure if ChrisH was referring to this but i'll state it more expicitly .. Charge upfront and offer a refund of double the value back in "Credit" towards your Product or Service you have for sale at the end of the event.
Re: Finance is the primary requirement of business - [quote="rauljoseph":36x8dadn]Finance is very important in a business. It is all about managing the business' money and other assets. Finance includes the study and analysis of processes, financial institutions, markets and instruments that are involved in the transfer of money or anything that has a monetary value among consumers, businesses and government.[/quote:36x8dadn] Good point. I'll just add that if I was going into business for myself and could only have one skill it would be Sales & Marketing. You need to be able to create customers first and foremost. Finance is more of a support function for entrepreneurs.
Finance is the primary requirement of business - Finance is very important in a business. It is all about managing the business' money and other assets. Finance includes the study and analysis of processes, financial institutions, markets and instruments that are involved in the transfer of money or anything that has a monetary value among consumers, businesses and government.
Seminar attendance - I read through most of these posts and the first thought that popped into my head Andy already posted. Charge a fee to register, that will be refundable at the end of the seminar. This will ensure they show up and STAY for it.
My entry - 1. The Best Business Books Ever: The 100 Most Influential Business Books You'll Never Have Time to Read - this is a fascinating book about the history of Business theory, and I'd recommend it to anybody. 2. The Big Book of Small Business: You Don't Have to Run Your Business by the Seat of Your Pants, by Tom Gegax. Ditto. 3. PADI: The Business of Diving Book Okay, so this book won't be of use to anyone who doesn't want to start a scuba store, but I did, and this book was of course invaluable to me in reaching that goal.


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