Approved Before the Business Had Taken a Penny

A mobile catering start-up came to us with a problem and a deadline. The company was registered, the equipment was bought, the first event was booked, and there was no van.

The director had spent more than a decade in hospitality, including senior food and beverage management, running several cafe sites, and turning a loss-making catering operation into a profitable one inside six months. He had left employment to set this up, and that was the difficulty. Having just given up a salaried job, personal finance was not realistically available to him. The company had not started trading either, so there were no accounts and no business income for a lender to look at.

He had done everything else properly. He had put his own money into the business bank account and used it to pay for commercial insurance, industry compliance membership, catering equipment, branding and stock before asking anyone to lend him anything. He was a homeowner with a spotless personal banking record.

Building the case on the director, not the business

With no trading history, the application had to be built around the person rather than the company.

We put together a submission covering his career, his industry contacts, the capital he had already committed and the fact that every other start-up cost was funded before he approached us. That is a very different proposition to a speculative new company, and the lenders who work with new businesses read it that way.

Because there was no business trading to examine, we asked for proof of the business bank account and four months of personal bank statements instead.

The VAT decision that made it work

This was the part that mattered most, and it is the sort of thing that gets missed.

He was not VAT registered, so he had no way of reclaiming the VAT on the purchase. The van he wanted was £12,000 plus VAT, £14,400 in total.

The standard approach would have been to finance the net figure and leave him to fund the £2,400 of VAT himself. On a business holding under £2,800 in cash, that would have left him almost nothing to trade with on his opening weekend.

So we structured it the other way round, financing against the gross price with a deposit of around ten per cent. He put down £1,440 and financed the balance, which kept roughly £1,300 in the business for stock and running costs.

Had he been VAT registered, the advice would have been the opposite, because the VAT would have come back to him within a quarter. It is the same purchase either way. Which structure is right depends entirely on the VAT position of the business, and getting it the wrong way round would have cost him his working capital in his first fortnight.

Getting it done in the time available

He needed the van inside two weeks and had not chosen one yet.

Rather than wait for him to find something, we obtained the approval against an example vehicle of the right type and value, then substituted the actual van once he found it. That way the funding was agreed while he was still shopping, instead of the search and the application running one after the other.

The outcome

Approved by a lender that supports newly formed companies, over a five year term, at a monthly payment the business could comfortably carry from event income. The van was delivered in time for the first booking.

He left us a five star review afterwards.

Handled by Guy Prince

What this means if you are in the same position

Not trading yet is not the obstacle most people assume it is.

What lenders want to see is a director who knows the industry, has committed their own money and manages their personal finances well. If that is you, bring your background and your bank statements to the conversation. And tell us whether you are VAT registered, because as this case shows, it changes how the deal should be built.

Every application is assessed on its own merits and terms depend on individual circumstances.

Talk to us about your business

Whether you have been trading for years or have not started yet, tell us what you are trying to do. No obligation, no upfront fees.

Business Van Finance

We arrange van finance for UK limited companies and sole traders. Access to 100+ lenders. FCA authorised, FRN 984955.