Evidence has shown Turner Little that the UK small business finance market is on the road to recovery, as net lending to smaller companies has grown significantly in 2015. The second Small Business Finance Markets report from the state-owned economic development bank, the British Business Bank, revealed that equity finance deals involving small businesses grew by 43% in the year to October 2015.
Meanwhile, peer-to-peer (P2P) lending to small businesses skyrocketed by 75% to £1.62 billion over the same period. With banks’ appetite for risk having waned following the recession, small businesses are increasingly turning to these alternative sources of business finance. Here, Turner Little looks at five alternative finance vehicles which you can use to raise funds for your company.
Equity finance
If you’re still establishing your business, equity finance may a good funding choice. Your firm can apply for equity through crowdfunding platforms such as Crowdbnk and Crowdcube. The process usually involves going through business plans and growth projections with a fine-tooth comb and producing a promotional video for the business. The pitch will then go live on the platform, giving investors the opportunity to get a slice of your company in exchange for funding.
Peer-to-peer lending
P2Plending is popular with small businesses. Unsecured loans are offered through P2P lending services such as Funding Circle, which has now lent more than £1bn. As a small business, you can borrow from P2P lenders by advertising your company and loan proposition to potential investors. They will then indicate their interest, the amount they are prepared to lend and the rate they expect as a return on investment to your firm.
Debt factoring and invoice discounting
If your small businesses has cash flow problems or issues with late settlement of customer invoices, debt factoring and invoice discounting could act as viable alternative finance options. These are based on the notion that your business sells its invoices to a third party that then processes them. Your company can then secure loans based on the expected invoice payments.
Merchant cash advance
Merchant cash advance (MCA), which links borrowing to card payments, could be ideal for you if you’re running a more established small business. Here, repayments are made as a percentage of card payments taken by your firm, so you only make repayments when you’ve got money coming in.
Charities and regional initiatives
If your enterprise is really struggling to source financing, you can secure funds from charities and regional or local authority initiatives as a last resort. These will typically offer loans of up to £20,000 to small businesses that have been refused finance by banks. Interest is charged on these unsecured loans, usually at slightly higher rates than those levied by high street lenders.
Turner Little
As a small business head, if you’re looking to utilise alternative finance you should ensure that your venture has the infrastructure in place to manage its finances effectively. As registered bank intermediaries and business consultants, Turner Little offers the corporate banking service your company requires to help increase its revenue stream going forward.
Turner Little was founded in 1998 and it has since become a well-established UK based professional Company Registration Agent, Registered Bank Intermediaries and Business Consultants, as well as Trust provider.
