What is private funding and why would I need it?
Private funding is an alternative way of funding your business/commercial finance needs. Typically a customer would take out a private funding loan as they don’t meet the criteria for commercial finance with the banks.
Private funding should be seen as a stop gap solution and never a long term solution to your finance needs. In most cases, as your business grows you can refinance these facilities to a major lender at a lower rate.
Are the rates higher with private funders?
Unfortunately yes. Interest rates with private funders are higher than what the banks offer and there is good reason for it. Private funders are often a group of investors who are looking to get a better return on their money than what the banks can offer. Because they are not a bank, they can often and do lend money to those individuals who don’t qualify for a normal business or commercial loan.
For Example, if you were new in business and needed a quick cash injection to get your business running, a private funder will often lend you the money if you can provide an asset for security. The lending criteria is not as strict with private funders as banks. In this example, after the business had been running for a while, you could look to refinance that loan with a major bank to repay the private loan.
Is private funding purely for business purposes?
Primarily yes, as lending restrictions for companies are not as tight as those for individuals, private funders like to lend to companies. The funds can be used for a variety of things, such as:
As previously mentioned, private funding should be seen as a short term solution, before taking up a private funding solution, contact our staff to ensure that there is no way you qualify for a business loan through a major bank.