Import loan facility

There are many types of import loan facility available to fund the purchase of finished & unfinished goods, components, commodities, machinery, equipment or even services.

The choice of which import loan facility matches your specific business needs will be a combination of the following factors, (which we would assess during our review process):

  • Value of import
  • Regularity of import trade
  • Internal international trade experience & expertise
  • Age of your import business, (start-up to fully established)
  • Credit worthiness of your import business
  • Ability to service the debt
  • Cash flow profile during and post import

Additionally you may find the following articles in our Journal useful:

Types of import loan facility:

Irrespective of how the loan is “packaged” and marketed by a commercial finance lender or bank, there are effectively 3 types of import loan facility:

  • Unsecured business loan
  • Secured business loan
  • Peer 2 Peer business loan

Unsecured business loan:

Security, if any, will be just a personal guarantee from the import business director(s).

Typical duration 3-24 months, (although it’s possible to repay after just 1 month – short term business loans)

Interest rates are typically 15% +

Secured business loan:

Security will be a formal charge, (debenture), over the company assets plus possibly a personal guarantee from the import business director(s).

Typical duration 2-5 years with a penalty for early repayment, (compare to short term business loans of 1-12 months).

Interest rates are typically 6% +

Peer 2 Peer business loans (“P2P”):

The growth of crowd funding, crowd lending and alternative finance solutions since the last global financial crisis has been staggering.

According to the industry Peer2Peer finance association, the amount lent to UK SME’s via a P2P platform in 2016 was £3 Billion.

An import loan facility using a P2P platform can be unsecured or secured.

However, because of the Application process and due diligence involved, (unskilled members of the public are investing their own money alongside skilled institutional investors), interest rates tend to range below unsecured at 8-14%

Choice of import loan facility, Pros & Cons:

There is more detail on each type of import loan facility via our import finance solutions pages.

However to summarise the pros and cons of each type:

Unsecured business loan Pros:
  • Quick application & decision
  • Short term commitment
  • Low security required
  • Early repayment potential
  • Start-ups and young companies accepted
Unsecured business loan Cons:
  • High interest rates
  • High cost
  • Director(s) personally liable via guarantee
  • Lower value loans
Secured business loan Pros:
  • Low interest rate
  • Low cost
  • Director(s) may not be personally liable
  • Higher value loans
Secured business loan Cons:
  • Long application & decision process
  • Long term commitment
  • Early redemption penalties
  • Formal business security (which may be prohibited by existing finance commitments)
  • Not for Start-ups or young companies

Peer 2 Peer business loan:

P2P business loans can be secured or unsecured so depending on the form chosen, the previous pros & cons apply with a bias to those listed for a secured business loan.

Below just a couple of very general pros & cons.

P2P Pros:
  • Number or providers & types of loan increasing
  • Continually increasing funds available to lend
P2P Cons:
  • Import business must be profitable & trading for a minimum of 1 year
  • Not suitable for Start-ups

Is an import loan facility the right choice?

The “Business first, funding second” process we’ll take you through will answer this question, as we review all the options with you.

However, in very general terms, if your import business:

  • Imports occasionally at fixed values? – YES
  • Imports frequently at variable values? – NO, (consider a revolving credit facility)
  • Imports equipment or machinery for own use, or to permanently remain in the UK after resale? – NO, (choose imported asset finance and deposit finance)
  • Has a purchase order for the goods or services being imported? – Possibly, (consider repayment via an import invoice finance solution)
  • Has a well established international trade process with experienced staff & processes that can ensure the import loan facility is “recycled” just for trade finance purposes? YES

With so much choice, what next?

We started Ashwood Partnerships as there are often many options to finance an import; an import loan facility is just one option to consider.

By bringing all options into one independent, whole of market, unbiased Firm focused totally on importers, we are able to provide all options for you to consider.

Contact us for a no obligation, informal chat about your import business and proposed import trade.

Further information you might find useful: