What alternatives does your SME have?
At some point during your journey, your business may need a cash boost – this could be to get your business off the ground, repay creditors or to help expand your business. Business loans cover all types of finance - anything from merchant cash advance, to asset finance or invoice finance, there is often always a solution which is more catered to your financial needs. So, let's take a look at some of the options out there...
Invoice finance is a fast and flexible way to secure loans based on the value of a business’ outstanding invoices to other companies. For a small fee, a lender will provide an advance of up to 90 per cent of the invoice value, enabling businesses access to funds that may not have otherwise have been available for up to 120 days. Invoice Finance can be much more expensive than a bank loan but it can plug short term gaps in cash flow and offer admin support for you to collect your outstanding invoices. Within invoice finance there are two popular choices; invoice discounting and invoice factoring. The difference between the two is in regards to who the responsibility falls on for the sales ledger and the collection of payments. Invoice factoring means the factoring company will pursue the payment on behalf of the business whereas, invoice discounting allows businesses to keep hold of their sales ledger and collections from their customers.
The market has seen great strides in terms of alternative finance options over the past few years and we at Businesscomparison.com make it our business to keep abreast on the latest new options available so that SMEs and other businesses get access to the funding they need to run their businesses efficiently.
Asset finance allows businesses to spread the cost of investing in equipment to run their business efficiently. This could range from computer systems and software to new machinery, or commercial vehicles. The finance breaks down the payments into more manageable instalments, asset finance has less of an impact on business cash flow and can yield tax benefits in some cases. Asset finance can be arranged in several ways, through leasing, hire purchase and contract hire.
Tax and VAT are things that a business cannot ignore unfortunately, and at the end of each tax period a significant sum has to paid to HMRC. Tax and VAT payments are frequent, however, sometimes it can be hard to pay upfront because of limitations in cashflow. Businesses can take advantage of a Tax or VAT loan which avoids slowing their business down or in some cases closing their doors. It is important that businesses do not ignore their Tax and VAT payments because HMRC will show no hesitance when issuing penalties to those who do not pay on time.
A bridging loan is often described as a 'bridge' to cover the gap between impending debts and credit soon to be available. A bridging loan is a form of short-term lending and can be approved and in your account within 7-days. Bridging loans are a secured form of finance, the loan will always be secured against a property or land. It is often used as as solution when waiting for a property to be sold. These are flexible facilities that can usually be redeemed at any point between 1 to 12 months.
Merchant Cash Advance
Merchant cash advances are a simple form of unsecured funding, which is paid back based against credit and debit card sales, meaning repayments are manageable and mirror business performance. Approval rates are typically higher than many other forms of finance and up to one month’s business earnings are available. Although the product is extremely flexible for a business this is usually considered more expensive than high street loan.
Businesscomparison.com was created to help SMEs across the UK compare, save and succeed when it comes to their financial planning and needs. We offer a free service, tailored to help businesses get the best deal available in the current market.
Equity crowdfunding, an increasingly popular way of securing finance, allows both experienced investors and your regular Joe to provide funding for a business, in return for equity. While most platforms are ‘all or nothing’, meaning if the fundraising target isn’t hit the backers will get their money back, it gives businesses the chance to make the most of the wide range of skills the investor group may have, and increases word-of-mouth marketing. Good for those looking to grow their business and willing to lose a percentage of the ownership for this funding.
This online process pairs businesses looking for loans with investors who have available savings or capital. These loans can be unsecured or secured and have fixed payments like a standard loan. While full financial records will have to be submitted, it offers the option to access finance within a matter of days or weeks, rather than months. Rates tend to be competitive if a little more expensive than banks however, the process of accessing your finance can be a lot easier.