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Business Loans Guide

Business Funding UK

A guide to helping you understand and compare business funding options

The types of business funding available

Almost every business will need business funding at some point, whether it is used to improve short-term cash flow, start a new business or take advantage of expansion opportunities.

There are many forms of business funding available, including everything from asset finance to invoice finance. Although, the most traditional forms of business funding are in the form of fixed term business loans and overdrafts, there are many alternative sources of funding available.

As specialists in providing businesses with access to finance, we know that there is always business funding available to suit your individual requirements.

To help you find the ideal finance for your business, this guide will take you through some of the most popular choices for business funding.

Through our diverse panel of lenders, we can provide business funding loans for any amount from £1,000 up to £20,000,000. Our streamlined application process could see funds available within 24 hours, so you can continue to drive your business towards success.

Access business funding through Invoice finance

If your business is already trading and has a revenue stream, invoice finance can be an excellent opportunity to unlock potential business funding. Invoice finance is ideal for businesses which have long invoice payment terms of 60 or 90 days, as it will quickly improve your cash flow.

The amount of business funding available will depend on the value of the outstanding invoices. Invoice finance is designed to unlock around 90% of the total value of invoices due to you. The lender will often purchase your outstanding invoice, then loan you a percentage of the amount due and charge their fee once the invoice is paid.

Invoice finance is available as either invoice discounting or invoice factoring, with the main difference being who is responsible for collecting the invoice payment.

If you choose to opt for the invoice factoring route the lender will pursue the invoice payment on your behalf, however with invoice discounting the business is still responsible for arranging the collection of the outstanding amount.

In most situations invoice finance is more expensive than traditional business funding streams such as bank loans, although it can provide a short-term solution to cash flow issues.

Asset-based business funding

Asset-based business funding is available in a variety of forms, from providing the funds required to purchase assets through to using the assets as a form of collateral.

If you are looking to take out a business loan and own physical assets such as cars and property, these can be used as security against a business loan. This asset-based security is ideal for businesses which need access to larger sums of business funding.

Alternatively, if your business is looking to purchase essential assets there is business funding available to purchase items such as commercial vehicles, stock and IT systems.

The finance is broken down into a series of manageable monthly repayments, which can improve business cash flow and provide potential tax savings. The majority of asset finance options are in the form of hire purchase, contract hire and leasing agreements.

Business funding through crowdfunding platforms

Crowdfunding platforms are a popular way to raise business funding from either individual investors of purchasers. Equity based crowdfunding campaigns are an ideal way to secure finance from experienced investors and those who have an interest in helping your business succeed.

The majority of platforms will require you to set a fundraising target which you will need to reach to access the funding, if not, the investors will be given their money back. This all or nothing approach will require a significant amount of time and effort on your behalf, with the success of the funding largely dependent on your marketing efforts.

If you are successful in achieving your target, a crowdfunding campaign can be an excellent form of alternative business funding. If you are willing to lose a percentage of the ownership of your business to equity investors, you could benefit from their wide range of useful skills and huge increases in word-of-mouth marketing.

Peer-to-peer lending

Peer-to-peer lending is similar in some ways to crowdfunding platforms as they pair investors with those looking to secure business funding. However, instead of providing the investor will a stake in the business the funding is repaid in fixed payments, in the same way as traditional unsecured or secured business loans.

The main benefit is that business funding can be accessed in just a few days rather than having to wait weeks with traditional business lenders. Although, you will need to undergo the same financial and credit checks, so it is useful to have these documents ready to speed up the process.

The rates offered by peer-to-peer lenders are competitive, although will usually be slightly more expensive than high-street banks.

Instant funding through business overdrafts or credit cards

If your business needs access to quick funding, a business overdraft or credit card could be the ideal solution. Overdrafts and credit cards are both quick to setup and will act as a flexible form of business funding to improve cash-flow.

They will suit businesses which only require a small overdraft facility to cover expenses while waiting for income. They are not an ideal long-term solution to finance, as the interest rates and charges are likely to be much higher than a conventional business loan.

If you take out an overdraft and the bank decide your trading circumstances have changed, they can demand that you repay the amount loaned in full at any time. This can cause unexpected issues with cash flow, so fixed monthly repayments through a traditional loan may be a more manageable solution.

A credit card will offer monthly repayments, but the level of interest rates and often short-term repayment periods can make it easy for a business to fall into arrears. Although, if you have a constant level of trading each month, they can be a useful form of business funding.

Access unsecured funding with a merchant cash advance

If you are looking for a simple form of unsecured business funding, a merchant cash advance is ideal. The loan is repaid against any future credit or debit card income transactions, which means the repayments are designed to mirror your trading performance.

It is possible to access up to one month’s worth of your typical business earnings and approval rates tend to be higher than traditional fixed term loans. Although, this flexibility will mean that the charges and interest rates are more expensive than traditional forms of business funding.

Business funding through short-term bridging loans

Although traditionally used by property developers, a bridging loan can be used to cover the gap between expenses and anticipated income. The short-term lending is available in just a few days and will be secured against either property or land. As a short-term form of business funding it will have a fixed exit date when the loan will need to be repaid, this is usually set between 1 and 12 months.

Here at Business Comparison we are committed to providing you with the most flexible and competitively priced forms of business funding, including access to alternative forms of lending. Our loan comparison tools can help you find a source of business funding which is ideal for your specific requirements. Our team can also discuss the variety of options available and put you in touch with suitable lenders. To find out more, please contact our knowledgeable team today.

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