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Business Loans Guide

Contractor Finance

A guide to helping you understand and compare contractor finance options

A complete guide to contractor finance

There are many benefits to pursuing a contracting career, with the majority of people drawn to the flexibility and freedom to be able to create your own work pattern. However, this freedom to choose your own contracting assignments can result in financial pressure.

We specialise in helping every business find a range of suitable finance options from fixed term loans to invoice finance, business bank accounts and more. By working with a range of lenders, you can source the contractor finance you require whenever you need it. We can guide you towards lenders which are more likely to offer contractor finance, helping you to achieve your business goals and personal ambitions.

How easy will it be to arrange contractor finance?

Almost every business requires financial assistance at some point, with contractors being no exception. As a self-employed contractor income can be sporadic, which can make finding a competitive and flexible form of contractor finance difficult. However, we have a panel of some of the most flexible lenders who can provide quick and easy to access loans.

Many contractors struggle to qualify for a traditional bank loan, as many lenders will see self-employed individuals as a higher lending risk. The majority of contractors operate as sole traders which makes them personally responsible for repaying any debts. This means the financial success of the business relies entirely on the individual’s success, skills and ability to work.

Thankfully, we work with a variety of lenders who are able to provide loans to suit the circumstances of each individual contractor. The range of alternative contractor finance options is always increasing, and we have access to the most convenient and flexible options.

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The benefits of contractor finance

Every contractor can experience downturns in income, which can put the future success of the business at risk. However, the availability of contractor finance can steer your business back towards profitability. There are many reasons why a contractor’s earnings could decrease, from being unable to work due to health or personal issues to suffering from a reduction in the demand for the services.

Contractor finance could give you the breathing space you need or even provide the capital required to promote your services. The competition between contractors can be tough but investing spare capital in training courses or promotion of your services could give your income a boost.

What contractor finance solutions are available?

The majority of lenders will need to examine factors such as your income levels, credit rating and assets. By assessing your credit worthiness, they will decide whether you are eligible for a business loan to support your consulting business.

Depending on your specific circumstances and your requirements you could be offered anything from a fixed term secured loan to invoice financing. Our lenders can provide consulting finance for amounts from £1,000 up to £20,000,000, so we are ideally positioned to find you the funds your consultancy service requires.

A fixed term loan is available as either a secured or unsecured loan, with interest rates usually based on the level of risk and length of the repayment period. Generally, a secured loan which uses your assets as collateral represents a lower risk, so the lender will charge a lower rate of interest and offer longer repayment periods. If you opt for an unsecured loan, the higher risk will often mean the loan will cost more and you will need to repay the amount in shorter period of time.

Lines of credit are another popular form of contractor finance, with lenders providing access to an agreed sum. The funds can be accessed at any time and you will only need to pay interest on the amount you have actually borrowed. Lines of credit work in a similar way to credit cards and can provide a cheap alternative to a fixed term loan, especially if you are unsure how much you will need to borrow.

Many contractors struggle if invoices are not paid on time, especially if they provide long payment terms such as 60 or 90 days. Invoice factoring is an excellent way to improve cash flow, with long-term outstanding invoices sold to factoring companies who then pay you upfront for the amount owed. Alternatively, invoice financing can be used to loan you the outstanding invoice amount, but you are still responsible for chasing the client for payment.

Peer-to-peer lending is an alternative form of lending and is ideal for many contractors who are unable to borrow from traditional lenders. The lending platform features a variety of potential investors who are willing to loan to all types of businesses, especially if they take an interest in the type of contracting work you offer. Typically, these non-traditional lenders have a more relaxed approach to loan approval, with funding often released relatively quickly.

Compare the available contractor finance options

Here at Business Comparison, we help contractors across the UK compare their finance options. We understand that every contractor has a unique set of circumstances, so our team specialise in helping you find the ideal finance option for you.

We have developed a finance finder tool which will ask you a series of quick questions to gain a better understanding of your position. The tool then compares the lenders which are able to meet your requirements, so that you have a list of potential finance options. Our tool will provide you with the most comprehensive list of lenders, which all provide contractor finance products to suit your needs.

Our panel includes everything from traditional high street banks to alternative peer to peer lenders. Although rates, terms and fees of the various contractor finance options will vary between lenders, there are many competitive options to choose from.

How to apply for contractor finance

In the past those who work for themselves have struggled to successfully apply for contractor finance. However, our panel of lenders will provide quick and easy access to the funds you need. Once you have found the ideal lender from our panel you will be ready to start the application process, with many offering loans within just 24 hours.

The lenders will look at a variety of important factors such as how long you have been contracting, your annual turnover, recently filed accounts, why you need the finance and how long you need it for. They will use this information to decide which forms of finance are suitable for your needs, although there are a few ways which you can help your application.

For example, spending time writing a solid business plan will show that you are committed to contracting and repaying the loan. Explain in detail exactly how the funds will be spent to help you grow your business, then show how this growth will easily enable you to afford to repay the loan.

We understand that finding the best forms of contractor finance and completing the application can be time-consuming and confusing, so we are always on hand to help you complete the process. We can take you through the finer details and help you understand the various terms and conditions, interest charges and fees. If you would like to discuss the contractor finance options available to you, please contact our experienced team today.

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