Business Finance: Assessing Your OptionsPublished on 14th June 2018 2018-06-14T15:32:26+00:00 - Last update on 8th January 2019 2019-01-08T15:08:53+00:00
When running any business, regardless of size or sector, it’s essential that you’re fully aware of what funding opportunities are available. Over the years, the ways in which you can source external funding have grown, giving you more pathways to explore than ever before. Since the 2008 banking crisis, there has been an increasing desire for additional funding opportunities, which has also arisen from the changes affecting the global economy and tighter banking regulations, such as Basel III. Yet, although it’s been a turbulent time for the UK’s business community in the face of continuing uncertainty, this is ultimately great news if you’re looking for new ways to boost investment, reinforce sustainability or fund key projects. The challenge that needs to be overcome is a lack of confidence and awareness in what funding opportunities may exist beyond your local high street bank. So to help you gain a stronger understanding of what lies in wait for you, here’s a brief summary of the business finance landscape, including:
- Alternative Finance
- Unsecured Lending
In spite of tougher regulations, many business owners still make high street banks their first port of call when searching for business finance. Although banks undoubtedly play an important role in the funding of British businesses, providing access to secured funds at lower interest rates, getting accepted can be difficult. Since the strengthening of regulations, banks have become far more cautious when deciding whether or not to lend to SMEs with limited trading histories and unproven business models, though it isn’t impossible. Meanwhile, established businesses traditionally tend to have a stronger chance of qualifying when applying to their bank. As such, this has created a rift between small businesses and high street banks, which the Alternative Finance has been striving to fill.
The Alternative Finance industry is another pathway that you can explore in order to receive access to a diverse range of either secured or unsecured business finance solutions from anyone other than your high street bank. This encompasses funding from Alternative Lenders, Boutique Banks, Private Investors or anyone else willing to invest in your business. Reviewing what the Alternative Finance industry has to offer can prove invaluable if you’re a developing SME looking beyond Investment Crowdfunding and Loan-based Crowdfunding. Yet despite the benefits, many business owners are still unaware of what the Alternative Finance industry has to offer, or they treat it with scepticism, possibly due to being previously rejected by their bank or the higher interest rates that can sometimes be associated with certain types of funding. However, as the Alternative Finance industry becomes more mainstream, you may eventually choose to explore what this avenue has on offer before (or at the same time as) approaching your high street bank. But to give you a stronger understanding of what’s on offer, here’s a brief analysis of the two types of lending that are available.
If your business possesses unencumbered assets, there are a number of Asset-Backed funding opportunities available that could help you receive the funds and equipment your business needs to progress and remain sustainable. These products typically use assets such as equipment, machinery, vehicles or property as security, with some even using your receivables. Just some of the Asset-Backed products that are available to you include Asset Financing, Invoice Discounting, Inventory Finance, Trade Finance and Asset Refinancing. So if this is something you’d be interested in exploring, speaking with a qualified business finance professional could prove invaluable in helping you source an appropriate finance solution for your business.
On the other hand, if you run a business that currently doesn’t possess any assets, there are Unsecured business finance products available that could offer the funds that you need. Although Unsecured products tend to carry higher interest rates and stricter entry requirements, some of the products on offer take a different approach and may, instead, focus on your business’ past income. However, lenders typically consider Unsecured lending as a higher risk, which is why they may require you to offer them a written or verbal Personal Guarantee. This reassures lenders of your commitment to repaying the agreement and could help you receive a larger lump sum. So if you aren’t asset-rich, don’t want to risk your home or jeopardize day-to-day operations, Unsecured Lending could be the answer.
Need help sourcing an appropriate business finance agreement?
With so many different lenders and business finance solutions to choose from, navigating the diverse world of business funding on your own is not for the faint-hearted. Although you may have set your sights upon a particular product, how can you be sure that exploring other pathways won’t help you source a more favourable agreement elsewhere? This is a question that can give any business owner sleepless nights, especially if you’re unaware of what questions you need to ask first. If you’re still unsure of which lender to approach, some questions you need to consider are:
- Will you be able to form a strong relationship with that particular lender?
- How well do they understand your business and can their experience add any value?
- Are they familiar with how your sector works and can they appreciate the challenges you face?
- Can they offer you the support and flexibility your business requires?
- Will the product that you’re currently looking at reinforce your business’ ability to grow?
- How will it affect your day-to-day operations?
- Will the agreement be compatible with your working capital and any other capital expenses?
At Rangewell, we can help you answer these questions and so much more! We’re an Access to Finance specialist working with over 300 lenders to offer you an overview of more than 23,000 business finance products. Our services are free to use and we’ll also guide through the application process. We’re with you every step of the way. So if you’re looking for business finance and need help sourcing a suitable agreement with a competitive interest rate, apply for Business Finance today or find out more with Rangewell.
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