Raising finance – what do I need to do?
Published December 5th, 2017
With so many sources of finance available in today’s marketplace, it can sometimes be difficult to know how to go about putting a proposal together to a lender.
There are many things to consider before making a request to a lender to support a proposal. ‘A failure to plan is a plan to fail’, the old saying goes, so before asking for finance there are several important considerations.
“Firstly, lenders like to see a strong track record evidenced by current financial information so make sure that you can provide the most up-to-date details possible,” advised Mark Lord, a business consultant with Berrys at Shrewsbury.
“There should ideally be a detailed proposal to support any request for borrowing and this should outline the purpose of the loan, how the amount required has been arrived at, what stake is the borrower committing to the deal and what difference it will make to your business.
“The crucial detail that any lender will need to see is how the borrowing is going to be serviced and repaid and what secondary sources of repayment are available if things don’t go to plan.
“Sensitivities to the proposal will be applied as part of a lender’s assessment to look at the “what if” situations should output prices fall or costs increase and what impact will potentially increased interest rates and reduced levels of subsidy post Brexit have on any proposal.”
In the agriculture sector, because of the levels of capital required for most projects and the relatively low rates of interest that borrowers expect to be paying, all lenders will be looking for good quality, marketable security and will need an opinion of the value from a Professional Valuer.
Sarah Reece a partner and registered valuer at Berrys says lenders have very specific requirements in this respect and will expect the valuation to be in a specific format.
“Lenders refer to the need for a Red Book Valuation, which is a valuation that complies with the Royal Institution of Chartered Surveyors (RICS) Valuation – Global Standards,” she explained.
“The valuation of the security needs to be undertaken by a RICS Registered Valuer who can provide the lender with their opinion of market value and market rent, justification for how the opinion of value has been reached and, amongst other things, guidance as to any conditions that may need to be included as part of the loan.
“The valuation report will comprise a comprehensive written document and each lender has their own specific requirements in addition to the requirements of the Red Book.
“The key thing to remember is the valuer is acting for the lender, not the borrower. The valuer is the eyes and ears of the lender who will undertake a thorough inspection of the property prior to preparing their report.
“From a borrower’s perspective when meeting a valuer to show them the property be clear about what the security property is going to be and have as much relevant information to hand concerning things such as planning permission, easements and rights of ways and leases or occupational arrangements affecting the property,” she advised.
Mark Lords said lenders have ample funds available to support good quality proposals and in today’s highly regulated and compliant market, if you can put plenty of thought and detail into your proposal you should be able to get a positive outcome to your request for finance.
“A comprehensive Business Plan covering all relevant points is becoming more of an expectation and a lender will prefer to see professional input into your proposition,” Mark said.
“If you have a proposition where you can afford to comfortably service loan repayments in line with a lender’s criteria and can offer good quality, marketable security where the value can be confirmed by a professional then you should be able to raise the finance you may require to make your proposal work.”