Tailored Business Loans

A Tailored Business Loan is a loan with embedded interest rate hedging. TBLs are referred to as “loans with embedded swaps” or “loans with embedded interest rate protection products”. In this blog we’ll explain what exactly a tailored business loan is, how to get one and why you may need one.

In this blog we’ll explore:

  • What is a tailored business loan
  • How to get a business loan
  • How to increase your chances of getting a loan
  • How Drop Studio can help you secure funding

What is a tailored business loan

A tailored business loan is a type of business loan that typically contains some sort of interest rate hedging arrangement attached to the loan. The types of hedging arrangement can vary from a simple interest rate cap or fixed rate to a much more complicated Modified Participating Fixed Rate Loan (a form of Structured Collar).

How businesses borrow money to fund their operating costs is fundamentally different than the consumer loan definition. While some purchases may be similar, such as buying real estate, the terms of a business loan and the terms of a consumer loan can vary greatly.

Tailored Business Loans are different from standalone interest rate hedging products such as swaps, as they combined an embedded hedging product within the loan itself.  Tailored business loans are typically structured in a way to provide protection for businesses from increases in interest rates.

How much a business needs to make to get a loan

A tailored business loan can help you start or grow your company depending on your needs and reasons for getting funding, but navigating the process and lending standards can be intimidating if you don’t know what you’re doing. Breaking it down to manageable steps — from understanding qualifications to shopping for lenders can help you secure the funding your business needs.

The big question is how much do you need to be making currently in order to get a loan and how do you get one?

When you take out a tailored business loan, you’ll have to apply for it and tell the lender what it’s for. In the same way as applying for a personal loan, you will need to show a lender what your income is and how you plan to repay the loan.

You can choose how long you take it out for. The lenders will most likely give you different options. You’ll usually pay it back over a period of one to 30 years, depending on whether you go for a medium-term or long-term loan. The payments and interest rate tend to be fixed for the duration of the loan.

How to increase your chances of getting a loan

Imagine just walking into a bank or a lender’s office and politely asking to borrow £500,000 and pay it back whenever you feel like it. Would be a dream, wouldn’t it? Well, there’s procedure to follow when applying for a tailored business loan. And unfortunately you can’t pay it back whenever you feel like.

You know why you need the funding and the reasons behind it. But why should the lender’s give it to you? Business loans are a frequently used resource to help support a company’s growth. The tricky part is getting the capital when it is needed. If the company doesn’t prepare for getting a business loan far in advance of when they require it, chances are you won’t get it.

Here are a few tips to help you prepare and increase your chances of getting the loan you need:

  1. Have your current financial statements – A company needs to have detailed year-to-date results. This is the first thing that any business loan source will want to see. How much are you making? How much can you afford to take? How risky would it be to give you the loan? These questions will be answered by your financial statements.
  2. Boost sales growth – At the end of the day lenders like to see at least some sort of revenue growth year over year. Business loan sources like companies whose sales are growing rapidly. Why? Because they want to fund growth, not fill in for losses. They believe that growing companies are in a better position to pay back debt than shrinking ones.
  3. Monitor your business and personal credit scores – Business loan lenders like numbers and will always check scores. Paying vendors on time is a great way to boost your score and credibility. Personal credit scores are affected by how you pay your personal debts and whatever credit accounts you may have. The formula for boosting this is a bit more complicated. It can take into consideration the amount of outstanding personal debt, the credit still available and the lack of late payment flags.
  4. Build relationships with possible lenders – At the end of the day, as much as a lender is giving money to your business, you’re accountable for it, people make business loans to a person, not a business. This means that company owners can benefit from building fruitful relationships with lenders far in advance of ever applying for a business loan. This way, the source may be more likely to give you the loan when your company needs it.

Above everything else, whenever presenting for a business loan, be organized, detailed and over-prepared for any question that might come up. Have a specific plan for how much money is needed, what it will be used for and how exactly it will be paid back. This diligence ahead of time may help increase your company’s odds of getting a business loan.

How Drop Studio can help you secure funding

As mentioned in our other blogs, trying to secure that much needed funding for your business to scale is no easy task. It may be an emotionally taxing experience. That’s where Drop Studio comes in.

We can help. We are proud partners of Crowdcube and Indiegogo. We assist ambitious businesses like yours in communicating their ideas, with outstanding crowdfunding video production, campaign design, crowdfunding marketing, PR and more.

We support you as our clients in finding angel investors, venture capital investors and to run successful Crowdfunding campaigns. To date, we have helped raise over £50 Million for our clients. You could be next.

Our passion is supporting entrepreneurs and leaders grow their businesses. Let us help you!