Jon Maloney explains the process of applying for a loan to finance a bakery business.

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

Yes, you can get a business loan for a bakery. In terms of the loans or finance a bakery might use, my background is in asset finance and leasing – and many bakeries use those types of borrowing for things like mixers, provers and refrigeration.

We obviously arrange business loans, which are unsecured – so they are different from asset finance and leasing. Like other businesses, bakeries can use unsecured loans for cash flow, recruitment, marketing, advertising, growth and one-off costs.

They can use a business loan for equipment, but I’ve often found that a bakery tends to use asset finance and lease for the equipment side of things. Everything else would be through business loans.

I’m looking to expand and grow my bakery business. What eligibility criteria do I need to meet for a business loan?

Have you been trading over a year, and do you turn over a minimum of £10,000 every month on average? Those are the key eligibility questions.

Bakeries are often quite long standing businesses. I’m sure they do exist, but we rarely see a start-up bakery. They’ve usually been around for years, although they may have changes of ownership.

But as long as you meet those criteria, we’ll be able to find you a loan.

Can individuals or only companies apply for business loans?

It’s simple – you need to have a business.

How much can I borrow for my bakery business? How is income assessed and what sort of documents do I need to provide?

You can borrow from £10,000 up to £500,000. In assessing affordability, that’s where the documentation comes in.

We ask for a full set of your last year end accounts and business bank statements for the past six months. Your accounts give you an overview of how the business is performing over the course of a year, but of course accounts are often 18 months old by the time they get prepared and filed.

That’s why we ask for the bank statements – it gives a clearer picture of how the business is operating right now. So it’s all done on affordability, and those bank statements make up a lot of that assessment.

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

The repayment terms are from six months to five years. In practice, the term will be down to affordability and risk.

It could be that you want the money over five years, but you’re only approved for two years or 12 months. A lot of it depends on the purpose of the loan. We often see loans for cash flow or working capital or to pay a one-off bill. In those situations, we tend to expect a six to 18 month term.

Yet a lot of people request cash flow loans over five years! We would hope that cash flow is a temporary issue. So the term has to marry up with the purpose. If you’re envisaging cash flow problems for the next five years, it might be time to think about doing something else.

We’re all business owners. Everybody’s experienced cash flow problems and pain financially when running a business – we do understand. But for something like cash flow or working capital, just be aware you won’t get a five year term.

What if I have bad credit – can I still apply for a loan for my bakery?

If you think you’ve got bad credit, I’d advise you to give us a call and explain why you think so – because your definition of bad credit will probably be different to ours.

Perhaps you’ve missed a couple of credit card payments in the last 12 months, but they’re up to date now. You might deem that to be bad credit – but while that has had an effect on your credit score, it doesn’t mean that you can’t borrow money. Get in touch and we’ll tell you whether it’s worth applying for a loan.

How long does the application process take?

It takes two minutes. Just click apply now and fill out the form. Within a couple of minutes you’ll hear from your account manager who will deal with the process from start to finish – you’re not passed from pillar to post.

They will ask you for your last set of year end accounts and the past six months’ business bank statements.

From application to receiving money in the bank can take between 24 and 48 hours. Sometimes we can be bogged down with a lot of applications, in which case it can take three or four days – just to put a little disclaimer in there.