The growing prominence of the Alternative Finance Industry26th April 2018
Looking to raise capital for your business? It used to be that your local high street bank was your first port of call - but no more. Although banks still play a vital role in supporting British business, the growing prominence of the Alternative Finance Industry has lead to the introduction of many new and exciting funding opportunities entering the lending landscape. A result of the 2008 banking crisis, the Alternative Finance Industry has since gained mainstream appeal. Not only has this industry reconnected SMEs with the opportunities that they may have lost as access to bank funding became subject to stricter regulation, but it’s enriched the offering available to all manner of businesses. But what does this mean for you as a business owner?
Greater lending flexibility
Before the banking crisis, you usually had to apply for a Secured business finance solution if you wanted to borrow more than £50,000. However, the lending landscape has since evolved with the emergence of the Alternative Finance Industry and offers you access to a wide variety of both Secured and Unsecured finance solutions. The result is greater flexibility, both in lending criteria and the way in which funds are dispensed. So whilst Secured products typically require collateral in the form of unencumbered assets (equipment, machinery, vehicles or property), Unsecured agreements do not. Whilst some products provide funding based on the amount of confidence lenders hold in your business, there are plenty of other finance solutions available that take into consideration monthly revenue, credit and debit card sales, unpaid B2B (Business-to-Business) invoices or even the amount of value held within your assets.
Looking for more ways to support your business’ growth? Approached your bank but weren’t satisfied with what was on offer? Apply for Alternative Finance or learn more about how your business could benefit.
Whilst banks are now subject to tighter lending regulations, this has allowed Alternative Finance lenders to gain a stronger foothold in the lending landscape and employ a creative approach to underwriting. A great example of this is the emergence of the Merchant Cash Advance. Here, you can receive an advance based on your business’ monthly credit and debit card sales. It works on an average, so if your business earns roughly £50,000, for example, then the amount you’ll receive would be in the same region. Plus, you can resolve the agreement using a Flexible Monthly Repayment Scheme which takes a percentage of your future monthly card sales to repay the lender. Therefore, creative underwriting is helping to make business finance much more accessible and affordable to many different businesses.
The introduction of overdraft replacements
When the banking crisis struck, one of the most popular finance solutions that small business owners lost access to was the overdraft facility - a product that you could establish alongside your existing banking arrangements. However, the rift that this loss left has since been filled in the form of an Overdraft Replacement Facility. Overdraft Replacement, also referred to as a Revolving Credit Facility, offers your business access to a Line of Credit (LOC). From here your business can benefit from an agreed allowance, allowing you to draw down funds as the need arises. Although you’re under no obligation to make use of these funds, you will be charged interest on anything that you do withdraw and it may need to be fully repaid within 30 - 90 days (depending on the agreement, of course). Working much like a credit card for your business, overdraft replacements can be used for all manner purposes including growth, operating expenses, and revenue support to replenishing your inventory.
Thinking about applying for Alternative Finance?
As well as drawing up a strategic business plan and bringing together a dedicated team, success also depends on making sure that you’ve got reliable access to funding opportunities. The Alternative Finance Industry has stepped in to fill the gap once reserved for your local bank branch. But not only has Alternative Finance filled the gap that was left behind, it’s also providing the entire business community with an ever-expanding array of finance solutions. This means that you have an even greater chance of sourcing a cost-effective solution for your business. Yet, with so many different products on offer, how can you be certain that you’re applying for the most suitable option?
At Rangewell, 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 a suitable Bank Loan Alternative, apply today or find out more with Rangewell.
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