Getting declined for a business loan can be disheartening and frustrating, but there are several alternative options available to businesses that can help you overcome this setback and still achieve your goals.
Here are some alternative avenues to consider when traditional business loans are not an option.
Government grants and schemes
The UK government offers various grants and schemes designed to support small businesses. These grants can cover a range of business needs, from research and development to export support. To find the right grant for your business, you can look at the government website to see what is available. Keep in mind that grants often come with specific eligibility criteria, so make sure your business fits the bill before applying.
The Recovery Loan Scheme (RLS) is a government backed initiative to help small businesses during and after the pandemic. The Recovery Loan Scheme gives lenders a 70% guarantee against the loan facility. This means there is less risk to the lender not receiving back their investment, so they are more likely to approve a business for a recovery loan, than a traditional business loan. The scheme has been extended to 2024, if you wish to explore this option, speak to one of our funding specialists.
Peer-to-peer (P2P) lending has gained popularity in recent years as an alternative to traditional bank loans. Peer-to-peer lending platforms connect businesses in need of loans with investors willing to lend money. This lending model bypasses traditional banks and financial institutions, allowing borrowers to access funds directly from a network of individual investors, often through online platforms or websites. P2P lending can be a viable option if you have been declined for a business loan from a bank. Each P2P lender will also have varying levels of appetite, so if you have been declined by one P2P lender, it does not mean you will be declined by all.
If you have been declined for a business loan, crowdfunding is a creative way to raise capital for your business. Platforms like GoFundMe and Crowdcube allow you to present your business idea to a global audience and attract potential investors or customers who believe in your vision. Crowdfunding can be particularly effective for startups and businesses with unique products or compelling stories.
If your business is struggling with cash flow due to delayed payments from clients, invoice finance might be the solution for you. Invoice finance companies work by advancing you a percentage of your outstanding invoices. This helps you maintain steady cash flow, while waiting for your clients to pay in full. This can be especially helpful for businesses that offer credit terms to customers. There are different types of invoice finance that could work for your business, these include: invoice discounting, invoice factoring, selective invoice finance and spot factoring.
Business credit cards
Business credit cards can serve as a flexible source of financing for your company. While they may come with higher interest rates than long term business loans, they offer a quick way to access cash that you can use as needed. Responsible use of business credit cards can help cover short-term expenses and bridge funding gaps.
Revolving credit facility
A revolving credit facility works similarly to a business credit card, but usually comes with lower costs. Revolving credit facilities typically have less strict eligibility requirements and can be a great option for young and start up businesses that may not be able to get a business loan.
Asset finance allows you to use your business assets, such as equipment, property and vehicles as collateral for a loan. Lenders evaluate the value of these assets and can provide a loan based on their assessed worth. You could also explore asset finance if you were looking for funding to purchase equipment or vehicles for your business. The lender will use the asset as security for the loan, so there is less perceived risk. This means it can be a useful option for businesses that have been declined for an unsecured loan.
While being declined for a business loan can be discouraging, it's important to remember that there are alternative options available. If you’d like to explore alternative business lending options, you can search for funding with Capitalise. We work with over 100 alternative lenders, so our funding specialists can help find the right solution for your specific needs.