Jon Maloney talks us through the process of exploring business loans for cafés.

Can you get a business loan for a café? What type of business loan would you need?

Yes, you can get a business loan for a café. If the loan is for actually purchasing a café, that would fall under a secured loan – a mortgage on the café building itself. It could also be a secured loan against your home address, provided you’ve got good equity.

If you already have the café, you can get a business loan for things like cashflow, working capital, furniture, stock, refrigeration, a shop fit, marketing, advertising or staff. It covers a wide variety of things.

The type of loan you would need for a café depends on the stage you’re at. If you’re already in the café trade, an unsecured business loan is often the most appropriate option.

How might a café benefit from using a business loan?

You could use a business loan to buy equipment, help with cashflow or manage an unexpected bill. Perhaps there’s been a leak or a flood and you need to fix the problem, or you need to pay a tax bill. An unsecured business loan can be used for anything.

There are no real exclusions. Obviously, you shouldn’t take out a business loan and then disappear to Brazil for six months – but as long as it’s for a business purpose that there are no limitations.

What eligibility criteria do I need to meet for a business loan to expand my café?

You need to have been trading for 12 months, and ideally you want to be turning over £10,000 or more per month. There are some exceptions to that rule, but it helps if you’re earning at around that level.

Can individuals or only businesses apply for a loan with you at Century?

We only deal with businesses. You can be a sole trader or a partnership, although it’s increasingly difficult to get loans for these entities due to FCA regulations.

A lot of lenders out there will simply not provide finance for sole traders. We can source them, but the criteria for a sole trader is slightly different in terms of minimum amounts. The minimum loan we do for non-limited businesses is £25,000  – and of course if you’re going to be borrowing that amount, you need to demonstrate affordability.

That may mean you might need a little bit more turnover than £10,000 a month through your bank. But as long as there’s a business, it’s eligible, and it’s been trading for over 12 months, we can usually help.

How much can I borrow for my café business?

How much you can borrow is all dependent on affordability. A lot of what we do is for cash flow and working capital purposes. Just by the nature of what they’re used for, they are short-term loans – so that’s anything from six to eighteen months.

If you’re borrowing quite a large amount of money over that period, you need to have the cash flow and income coming through your bank to afford the monthly payments. These payments will be higher when it’s over a shorter period of time.

You can borrow from £10,000 up to £500,000 as long as you can demonstrate affordability.

How is income assessed and what sort of documents do I need to provide?

We look at your year end accounts, but we actually gain more detail from your business bank statements. Your accounts are a snapshot of what’s happened over the course of a year, and tell the story of what the business was doing perhaps 18 months ago.

We ask for the last six months bank statements as well, as that gives a true picture of what’s happening in the business now.

What is the repayment term for a loan? What options do I have?

Everything’s assessed on affordability. We want to make sure you’re going to be able to pay the money back, without undue pressure on the business.

Repayment terms go from six months to five years, but a lot of what we do is for cash flow, working capital and one-off bills. Typically these loans have a six to 18 month timeframe.

What if I have bad credit? Can I still apply for a loan?

If you have bad credit, call us first and explain the details. People often think that, for example, a missed credit card payment in the past 12 months will automatically have a negative impact on credit score.

But we wouldn’t deem somebody to necessarily have bad credit unless they have taken out multiple loans and not paid them back. They have defaults and termination notices; they have CCJs and missed mortgage payments. That’s bad credit in our eyes.

So phone us up, explain why you think we’ve got bad credit and we will either confirm that, or more likely, we’ll explain we can still do something for you. It may have an effect on the rate, the term or the amount you can borrow, but it won’t necessarily mean that you can’t get a loan.

How do I apply for a loan for my café? What’s the process?

Go to our application page and click the check eligibility button. Once you’ve completed that it will give you a rudimentary decision. You can then go through to the full application – it takes about two minutes to fill out. You’ll next get an email from your dedicated account manager requesting the information we need – your accounts and last six months’ bank statements.

If you’re unsure about anything, speak to us. We know what we’re doing – whether you’ve got bad credit, or you think you might not have been trading long enough, or your turnover is low, we can explain all the options to you.

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