There’s a myth in the finance world that banks won’t provide finance for the purchase of a leasehold business. Over the years an idea has developed that without having the freehold property as security, then it becomes anathema to lenders and brokers alike.
At ASC, we abhor finance myths – misinformation causes small businesses to feel that they have no chance, when the funds are actually very much available. So, we’ve set out to clear up some of these myths and help you find the finance you need, no matter the situation.
Like many myths, this one has a kernel of truth – lacking a freehold does close off some more traditional avenues. However, that doesn’t mean that there aren’t finance options available to buy a leasehold business. Here are 3 of the most prominent:
1. Additional Security
The primary reason lenders want a freehold is for security. It provides lenders with an easy avenue to recoup money if needed. But just because a freehold is the most common method of securing a loan doesn’t mean that it’s the only one. Lenders may accept other property, or significant assets as a form of extra security. There are too many different methods of providing additional security to list here, but any good broker will be able to help you identify viable options for your business.
2. Enterprise Finance Guarantee Scheme
The EFGS exists for the explicit purpose of helping businesses that lack security find finance. They have much more open requirements that are aimed at helping less well-established businesses get the funds they need to actually establish themselves. It’s not an “easy option” – you still have to fulfil criteria and prove you’re worth the funds you’re asking for. However, the EFGS certainly presents a lifeline for buying a leasehold businesses and other situations where security may be lacking and those lacking in other types of security.
3. Unsecured Loans
The final option is, unsurprisingly, an unsecured loan. An unsecured loan is exactly what it says on the tin – a loan where no collateral is held, and the lender has to trust in the business to repay. Whilst an unsecured loan might seem ideal, there are caveats to be aware of. Not every lender will offer unsecured loans – many lenders, especially smaller ones, can’t take the risk. Unsecured loans are also typically much lower in value – lenders won’t put large amounts of money on the line completely unsecured. That being said, an unsecured loan may still be a viable option.
By now it should be clear that a leasehold business should be no object to finding the finance you need to help your business grow. If you’d like to look into the finance options available for your business, just get in touch with ASC and see how we can help!
ASC Finance for Business are Commercial, Business and Property Finance Brokers with 50 years of arranging faster, simpler, better finance for small businesses.
To speak to your local ASC Regional Director about getting finance, click here.