There are more options than ever before to help businesses find the funding to achieve their growth goals. With the rise of platform lenders and alternative sources of financing, companies have a wide selection of products available to them. Choice means there is a funding solution out there for just about any business.
Traditional bank lending requires at least a two-year trading history with preferably two sets of filed accounts, evidence of affordability and a strong balance sheet. If your company has these, a high street bank could be an attractive source of funds. If not, finding an alternative lender who will recognise the potential in your business can totally change the funding conversation.
Here are some of the most popular alternative lending products and some scenarios where they can be highly effective sources of funding:
Assets that are existing or soon-to-be purchased can serve as collateral for lending. A work vehicle is a great (yet often overlooked) asset as well as commercial property, inventory, machinery or technical equipment.
Issued invoices can act as security for funding with as little as a single invoice or as large as an entire sales ledger. Invoice finance can release up to 90 percent of the value of the invoice(s) and has become an increasingly popular way to increase cash flow and maintain stability.
Retailers, pubs and hotels are notoriously difficult to fund, but with just four months of trading and at least £4,000 of revenue through a credit card machine per month, you can use future cash flow to fund up to 150% of your prospective monthly receipts, often with flexible terms. Actually, anyone with a credit card machine can fund their business this way.
A business with a purchase order from a strong buyer can borrow against it as long as there would be more than a 30% margin on the order. Basically, a lender buys the stock or inventory needed to fulfill the order and takes care of all the related administrative details. It's an ideal cash flow strategy for the wholesale fashion industry, allowing brands to quickly pay suppliers and fund the credit period of retailers, and can be the basis of growth both domestically and internationally.
Whether it's expanding or improving your business, investing in advertising, or clearing up accounts payable or wages, a working capital loan can offer you the extra cash needed to finance every day operations. The unsecured loan cannot be used to buy long-term assets or investments, but can be a renewable source of capital.
Alternative lenders do not have the same restrictions as high street banks, so they are usually independent, service focused and have a lower cost base than traditional players, which allows them to better understand a business's funding needs and offer agreeable terms. They even have the flexibility to fund start-ups with no revenue (as long as you have a business plan) and provide financing to businesses with monthly subscriptions using a formula that assesses new customers versus lost customers.
One of the reasons I started Capitalise was to make it easy for businesses to navigate the alternative lender landscape. With so many options out there, there is always a hook. We specialise in matching businesses to lenders who are most likely to give them an offer so let us help you find yours!