There are a number of myths surrounding business finance that came into being through misunderstanding or incorrect information. Lee Schofield, Sales Director at PMD Business Finance, is keen to set the record straight and dispel the myths surrounding what is often a crucial part of business.
Myth #1 – ‘It is an incredibly slow process and decisions can take a really long time’
Banks have been known to be very slow and waiting times of up to three months are not unheard of. However, we can have an answer within just 24 hours. The difference between alternative finance and the banks when it comes to timescales is huge. Accessing alternative finance means growth is more realistic and potential expansion is quicker.
Myth #2 – ‘You can only finance assets’
Again, this is untrue. It’s a common misconception that we can only finance assets, but we can fund intangibles too, such as building and electricals. These can be included with the main asset or as a business loan.
Myth #3 – ‘The finance has to be secured’
Everything we do is actually unsecured. It’s completely different to banks, as banks look for security in the form of bricks and mortar. However, we don’t. We know that to grow a business you don’t want to be tied into one funding channel that holds onto security. Banks might dictate what a business could and couldn’t do, but we certainly don’t. For example, we recently worked with a multi-million pound global business that was being heavily dictated to by the bank. In the end it was holding them back from their growth plans. Alternative finance meant they could maximise different funding lines and invest substantially in their expansion plans.
Myth #4 – ‘It is much more expensive’
People think asset finance is a more costly alternative to the banks, but it has been proven that this is not the case. Rates are comparative and we also have the added benefit of multiple funding lines. We can fund equipment through three or four different funders, which gives our customers complete flexibility to grow. We generally charge a nominal arrangement fee of £150 per transaction, whereas banks can typically charge either 1% or £1,000 – whichever fee is higher.
Myth #5 – ‘All the agreements are under rolling terms’
Our agreements are fixed term and arranged from the outset. A fixed term will typically have 36 or 60 payments (three or five years) and when it comes to an end, the agreement is stalled and doesn’t renew. However, some companies use minimum term documents which roll on if they are not cancelled and can lead to unnecessary high costs. Ensuring your agreement is fixed term rather than minimum term is absolutely key.
Myth #6 – ‘It is a really complicated and time-consuming process’
These days, there’s no need to have long meetings. Everything can be done over the phone and through electronic documentation, which customers can complete in their own time, either before or after work, or even at the weekend. The entire process can be completed at a time that suits our customers best. It’s simple and easy.
Myth #7 – ‘Everyone is stuffy and out of touch with the industry’
We’ve cut our teeth in this industry. We’re approachable, we’re on the same wavelength and we understand the issues faced by our customers in this industry. At PMD, we can offer total flexibility and independence as we have access to 40 different funding lines, as well as our own lending book. Our reputation as a trustworthy finance provider is reflected in our customer retention rate, as many come back to us because they have dealt with us before and know there will be no hidden surprises. We understand how important it is to work with the right finance partner.
