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Case Study: funding an eCommerce business that was growing too fast
TL:DR When a new online business found that they were facing demand that they could not handle, they saw that despite a full order book, they were unable to secure additional funding. They approached us at Rangewell. We looked at the challenges of running an eCommerce business - and found the funding they needed with a line of credit. With stay-at-home orders preventing customers from coming in and lockdown preventing many shops from opening, brick-and-mortar premises have been forced to temporarily close. However, the same factors have given a boost to eCommerce businesses, which use a website as their showroom and point of sale. Instead of a quick run to the store, many consumers are now browsing and placing orders from their computers and smartphones, with both new and experienced online shoppers purchasing greater quantities and varieties of products than ever before. There are plenty of challenges for eCommerce businesses, but with the right combination of products, price and online marketing, they are capable of profitable trading and very rapid growth. At Rangewell, we were recently approached by a new eCommerce business that was enjoying real success - but which needed funding to ensure that success could continue. The challenge Our client was a clothing manufacturer based in the Midlands. They specialised in licensed designs - clothing of all types from t-shirts and polos to sweaters and complete outfits, with characters and images from the world of music, games and movies. “We started off selling band shirts at gigs. Naturally, we had a website, so fans who missed us at the live event could still get the merchandise. When it became impossible to stage live events, we started making the most of our site. We really started in April, when we might take £10,000 a day. Now we are closer to £35,000 per day. We are selling officially Licensed Merchandise ranges with Disney characters and these days that means Star Wars and Marvel characters as well as the mouse and Duck Tales - and there is always demand. So much that we can hardly keep up with it. Making the most of our site meant that we could sell any of our ranges to customers anywhere in the world. We found business was actually getting better as lockdown wore on.” The business had a small UK-based warehousing, packaging and fulfilment centre, but most manufacturing was done in the far east where costs are lower. “These days, distance manufacturing is no problem. I can pick up the phone or get on a zoom conference and talk to our manufacturers at any time. So if we have a sudden rush on something like a Hogwarts Christmas jumper, we can get the stock flown over in a few days.” The only problem with the business was keeping up with the demand from web customers. The order volumes required were getting larger, and with Christmas coming, the partners saw that they needed to bring in considerable quantities of their best-selling lines to cope with the growth of the business. But this would require paying money upfront to the manufacturers and, despite the success of the site, it was money that the business did not have. Funding of £500,000 to £1million would be required to bring in enough stock to see them through. The partners were unable to raise the necessary funds when they turned to their bank. “The bank didn’t understand our business and, because we had been trading in our present form for under a year, they were not prepared to advance us anything - despite the success of our business. We had no advance orders to use as security, and they had no experience of the potential of online businesses.” The partners turned to us at Rangewell for the solutions they needed. Funding for eCommerce businesses As experts in funding for eCommerce businesses, we understand the challenges. With traditional retailers, lenders have years of experience to base their lending decisions on, and bricks and mortar retailers can have physical assets - such as their premises - to offer as security. eCommerce is rather different. Many lenders will not look at applications in the sector because it is outside their experience. Consequently, eCommerce businesses tend to suffer from cash flow shortages and find their growth plans frustrated because they cannot find the finance they need. Fortunately at Rangewell, we have a team of eCommerce experts who understand the challenges you face when it comes to funding - and know the solutions that are available. The most popular of these is a line of credit. A business line of credit is a flexible funding product that enables businesses to draw on funds as and when needed. It’s typically used for immediate expenses rather than long-term investments, and acts very much like an old-style overdraft. A line of credit provides a pre-approved reserve of credit that you can call on as you need to at short notice. It’s a good option for eCommerce businesses that need short-term cash to cover expenses, for example, online advertising costs and new stock. When orders and cash then come into the business you can pay off what you have borrowed - which means that the cash you have taken out and repaid is ready to be taken out and used again. You pay interest only on the amount used, which means you avoid fixed costs and commitments which are unavoidable with a traditional term loan. But this type of funding has another important advantage. It helps keep pace with the growth of your business, because the more business you do, the more cash you generate and the quicker you can repay the amounts you take out. As your business grows, you can apply to extend the line of credit you can call on - ensuring that your further development is supported and that you can bring in stock to meet the demand your online presence generates. The funding Rangewell secured We arranged a line of credit, initially capped at £1million, for the client. It provided the flexibility they needed to stock up for the December demand, and because the amount drawn out could be repaid as soon as customer payments were received, the costs were moderate, compared with the increased revenue that could be generated. Rangewell finds the financial solutions that your business needs Whatever business sector you work in, our Business Funding Experts will be able to discuss your individual options and work out the most cost-effective ways to provide the funding you want - whatever the challenge your business conditions are presenting you with. We are independent, and we know the entire lending market. That means we can take a view that will put your interests first - and if you have not been successful because of your bank’s lending policies, we will work to find one that is more sympathetic. At Rangewell, we can help you arrange all types of business funding - including line of credit arrangements. Call us if your eCommerce business faces a funding challenge - we can help you find the answers you need.
What’s the difference between an Overdraft and a Term Loan
If you’re looking to borrow funds for your business, you might be considering a range of funding options. Two of the most popular that are considered by most companies are overdrafts and loans. We explain the differences – and round up the pros and cons of both. Term Loans A loan is simple to define. It is an arrangement that lets you borrow a cash lump sum. You repay it, with added interest, usually with monthly instalments. It is also known as Debt Finance. There are two main types. An Unsecured or Personal Loan is based on your creditworthiness as an individual and on the creditworthiness of your business. Secured Finance, on the other hand, will usually be secured against your property – which means that the lender will have the right to take your property if you do not keep up the loan. These can be less expensive – they have lower interest rates because the risk to the lender is lower. For the same reason, they can also provide much higher sums if required. Short-term loans are typically repaid over one to three years, while long-term loans can usually be paid off over a much longer timeframe - and terms or 10 years or more are not uncommon with secured lending. The arrangements can vary depending on the deal, provider and the amount of money you’ve borrowed. Borrowing can range from tens or hundreds to hundreds of thousands of pounds with Secured Loans, but whatever the sum you want to borrow, it’s important to ensure that you’ll be able to afford to repay the amount and have a plan in place to make your repayments on time. The advantages of a loan They can be arranged fast - some smaller unsecured loans can be arranged in a matter of hours The interest rates tend to be fixed so you’ll know what you’ll be paying each month A good credit history is valuable – but it still may be possible to arrange a loan if your history show problems with repayments in the past Loans can be tailored to particular needs You can choose secured or unsecured options in many cases The disadvantages of a loan The interest on a personal loan can be high if you’re only borrowing a small sum Secured loans can allow you to borrow more, but they are linked to high-value assets such as your property - this means if you are unable to keep up with your repayments, there is a risk you could lose your home Loan repayments are usually less flexible – the criteria is set by the lender, so it’s worth talking to them if you think you won’t be able to make them in time If you want to repay your loan early, there may be an early repayment fee Whatever funding need your business has, you can check your options quickly and for free Overdrafts A traditional agreed overdraft facility allows you to borrow money through your bank's current account up to a certain limit. It is very easy to use once it has been set up – your bank allows you to draw down funds that you don’t have in your current account as though you did. You can repay these funds as soon as you have cash available. You will usually have to pay interest or fees on the money you take out under your overdraft. There may still be a few banks that offer interest or fee-free overdrafts, but these will typically only apply up to a relatively low limit or for a set time. Banks used to offer overdrafts automatically for business banking customers, but many banks no longer offer overdrafts at all or restrict their availability. As a result, Alternative Overdrafts have become more common. With these, no bank account is involved and, instead, there is a line of credit provided by a lender which you may dip into as you require, paying only for the money you draw down and the time in which you borrow it. Overdrafts may give you access to funds of up to £2,000 or so, but how much you can actually draw down will vary depending on both your credit score and your income. Overdrafts have no specific repayment date, but it’s best to try and clear them as soon as possible – particularly if you’re being charged interest. The advantages of an overdraft You have flexible borrowing and repayments, which gives you some freedom to decide how much money you use and repay each month An overdraft tends to be the cheaper option for short-term borrowing, especially if you are you able to access one that doesn’t charge interest It can provide a financial safetynet to help you deal with unexpected costs or take advantage of an opportunity - knowing that the cash you need is ready and waiting Very short-term borrowing - for days or even hours - is simple and cost-effective Disadvantages of using an overdraft The amount of money you can access through your overdraft tends to be lower than with a personal loan Fees and interest charged on overdrafts can be high – especially if you go over your agreed limit – making it an expensive way to arrange funding An overdraft should not be considered as the solution for long-term funding, or for high levels of borrowing because of the costs involved. Getting help with the funds you need At Rangewell, we can provide solutions both for loans and overdraft replacement funding. We can help you decide on the most appropriate type of funding for you and search the entire lending market to find the most competitive rates for you and your business. That means, loan or overdraft, we can help you pay less for the funding you need. To find out more about working with Rangewell to find better answers to your funding needs simply call us. Our service is free.
Helping a nursery stay in business with £20,000 Cashflow Funding
If your clients include children’s nursery owners, you will know the financial challenges they face. There are market restrictions on what they can charge per child, and overheads are high. You may advise a small nursery to grow its numbers as the best route for profitability, but many parents - and children, and probably staff - may prefer a smaller facility with a friendly atmosphere. They will actively seek out a small nursery. It can mean that cashflow is tight - even for successful nursery businesses. We recently helped an accountant find a solution for a nursery operator who faced a cashflow problem - and which kept recurring, despite all she could do to keep costs under control. The accountant’s client ran a small nursery serving a bustling commuter town and had small premises close to the railway station - an ideal position for parents dropping off their children before heading off to work. The nursery was full to capacity, and the business was doing well - but there was a problem with cashflow that the accountant noticed occurred regularly in June and August and just after Christmas each year. “My client’s takings took a downturn twice a year. I asked her what was happening, and she explained that those were the times when she found she had empty places. Family holidays and Christmas breaks meant that her takings were down - and her cashflow was so tight, she found herself not bringing in enough income to cope with the outgoings.” The premises were expensive, with rent and business rates to pay for, but the main cost was that of staff. “The staff numbers my client needed are laid down in the rules and regulations she must work to. She can’t let staff go when children don’t come in - because she will need them again as soon as the numbers are back up. I needed to help her find some kind of cashflow support finance - so I called Rangewell.“ At Rangewell we work closely with accountants and other financial advisors to find the solutions their clients need. We looked at the client's pattern of business and saw two possibilities. A Working Capital Loan Working Capital Loans are used to cover everyday operating expenses, such as rent and payroll, when business is slow. They are simple, short-term loans designed to provide a cash lump sum fast and intended to be paid back in a matter of months - and they can be vital even for thriving businesses during times of growth. However, the accountant felt that this type of lending might simply compound his client's problems, and eventually leave her with a debt she might struggle to pay back from her available income, even though it might offer a short term solution. Revolving Credit Facility Fortunately, we had another answer for short-term funding needs - a revolving credit arrangement. Revolving Credit, also known as Overdraft Replacement or Alternative Overdraft Funding works much like the old-style bank overdraft, and provides a reserve of funding that can be called on as required - although no bank account is involved. Instead, the alternative overdraft provides a line of credit, usually based on past income. It is then up to you how much of this reserve of credit you use. Like an overdraft, the facility will only mean a cost when the use the facility, based on the amount you draw down, and the time which you hold it. It can be repaid at any time, and the funds will be ready for use again. The accountant felt that this would be the ideal solution for his client, and would tide her over the shortfalls - without presenting set obligations during the rest of the year. We searched a number of providers, and were able to source £20,000 of funding at the lowest cost - providing the financial safetynet the nursery operator needed. Ready to find out more about finance to solve your clients funding issues? Our experts can work with you to find the most appropriate solutions and the most competitive rates.
£50,000 Cashflow Finance for a farm
Cashflow is a challenge for every business sector, but especially for farmers, whose income stream may come in only at harvest time - despite the need to take care of year-round costs. The old-style overdraft provided a convenient solution for the cashflow needs of many small farmers, making it easy to dip into a cash reserve whenever it was required. Overdraft facilities were provided by a bank, and the facility would be agreed as part of your business banking arrangements. Its size would depend on the scale of your business, but with a sympathetic bank manager, it could be flexible enough to provide for most everyday cashflow challenges. It worked very simply - it let users withdraw cash that they didn’t have in their accounts, to use for a few days, weeks or months until funds came in. The bank would only charge for the cash withdrawn and for the time it was used, which could make the overdraft a cost-effective solution. Businesses of all kinds used their overdraft as a feature of their financial planning, providing a buffer against cashflow slowdowns - from late paying customers, to take advantage of an opportunity, or to deal with an unexpected expense. But when the credit crunch hit, many banks reduced or removed the overdrafts they extended to small businesses. The farming community was among those that felt the loss, suddenly finding that they had no way to access funds for the short-term. Fortunately, as the Alternative Finance market has developed, there are now new solutions which can provide support for farmers and other businesses facing cashflow challenges. A challenging industry We were recently approached by a farmer with a large arable farm in Berkshire. His farm had been in his family for generations, and he was determined to keep in operation, despite the challenges he was facing. “People outside the farming word seem to think that we farmers complain a lot. The fact is that there can be some big financial worries. Finding solutions is vital if you want to stay in business.” There are several factors at work to cause problems for farmers. Profit margins can be tight on many farms. Supermarkets and other buyers tend to use their buying power to drive down the price that can be realised for most types of harvest, and there are always concerns about grants and other funding, and especially now that Brexit has removed many of the old subsidies that many farmers relied on. But the biggest worry of all remains one of cashflow. Income only comes in at harvest time but the costs - for workers, diesel, pesticides and fertilizers - come in all year round. It means that a cashflow problem is almost inevitable for most farmers. Farming is vital to the UK economy, but many farmers struggle to make a profit and, as a result, many lenders are reluctant to lend to the sector. Those that do may offer loans at relatively high rates - reflecting the instability that can threaten many farmers' livelihoods. In the case of our client, the problem was made worse by the fact that he already had considerable debt, with outstanding finance for buildings and equipment. Looking for funding for your farm? Find out what support is available today How Rangewell helped We saw the solution was a Cashflow Loan - a flexible short-term loan designed to be repaid as soon as funds are available. We approached a lender who was sympathetic to the farming sector, and discussed our client's needs. We found our client a lender offering a Secured Loan at £50,000 at 16% - the equivalent of 1.33% per month. This allowed him to deal with the operating costs of his farm, and pay it back as soon as he sold his crops in a few months time. “16% sounds a lot - but the loan was for the short term, and would be paid off as soon as I brought the harvest in. I can draw money down for as long as a month. It is certainly better than using a credit card - the rates on that work out a lot more because you can’t pay back as flexibly.” The funding Rangewell arranged: £50,000 at 1.33 % per month Monthly interest repayment £625 The process was simple and - because we were able to approach lenders who understand the sector - we were able to arrange it with the minimum of paperwork and delays. To find out more about cashflow support for your farm - or other business - take a look at what business finance solutions are available by contacting us today.
How to negotiate better rates for Overdraft Replacement
If your business is in need of quick cash, your first instinct might be to approach your high street bank in order to establish an Overdraft Facility that will work alongside your current banking arrangements. However, the rules and regulations that banks must adhere to have made this form of finance difficult for SMEs to acquire. But, there is another way. Thanks to the Alternative Finance industry you could apply for an Overdraft Replacement facility, also referred to as a Revolving Credit Facility. An Overdraft Facility allows you to arrange a Line of Credit (LOC) from which you can withdraw funds from an agreed allowance without the need to involve your bank. Yet, although this allows you to access funds for your business whenever they are needed, such agreements tend to carry high interest rates. So if you’re wanting to establish a Line of Credit but are worried about what this may cost your business, here are just some of the steps you can take to negotiate a favourable interest rate when applying for an Overdraft Replacement. Ask to see a draft contract Consider asking for a smaller allowance Decide whether to provide security Improve your credit standing Check whether there are any additional costs involved Can I ask to review a draft contract? When first enquiring with a lender about applying for an Overdraft Replacement you can ask to review a draft contract, providing that one is available. Doing so will give you an early opportunity to review what terms and conditions you might be confronted with. In particular, check what covenants you may be subjected to and how they may affect your business. These can range from Informational Covenants, Affirmative Covenants and Negative Covenants to Financial Covenants, and may affect what you can and cannot do during the course of the agreement. Therefore, to strengthen your position, make a note of any aspect that may cause you concern and compare contracts from other lenders. Although entering negotiations can be daunting, knowing what to expect early on could give you an advantage, helping you push for a lower interest rate and more favourable terms and conditions. Are you having trouble meeting your financial commitments? Need access to quick cash? Apply for an Overdraft Replacement or learn more about how your business could benefit. Should I agree on a smaller allowance? Although you are under no obligation to withdraw any of the funds that could be made available to your business, one way to gain a lower interest rate is to ask for a smaller allowance. Of course, having access to a large allowance can be reassuring, but you should consider whether your business really needs access to all of the funds that the lender may be offering - but don’t forget to give your business some breathing space as well. If you need to withdraw more money than what the allowance permits, for example during emergencies, you’ll incur a penalty on top of the money that you’ve borrowed. Yet by asking to reduce the size of the allowance, you’ll be helping to minimise the risk to the lender and reassure them of your ability to afford the agreement. How can providing security help? Overdraft Replacement can be either Secured or Unsecured. But if your business adverse credit, applying for a Secured agreement could help make this form of finance more accessible. Secured agreement use your business’ unencumbered assets (equipment, machinery, vehicles, stock or property) as collateral. So, although Secured agreements often carry a lower interest rate compared with Unsecured solutions, this does mean putting these assets at risk of repossession should your business default. As such, you need to consider whether you’re willing to put assets at risk in exchange for a lower interest rate. In addition, you could offer a written or verbal Personal Guarantee expressing your commitment to repaying the agreement on time. What can I do to improve my Credit Profile? Although it won’t always be used against you, lenders will usually ask for permission to review your Personal and Business Credit Profile. This helps them to understand where you and your business stand financially. When assessing your Credit Reports, lenders incorporate into their search whether you have CCJs, Accelerated Payment Notices, Arrears, unpaid debts (eg. credit card debts) and whether you have a reliable history of paying off debt on time. If there are any issues that lenders need to be aware of you need to upfront. Should they find any issues that they weren’t made aware of it will affect the credibility of your application and make it harder to for you to gain an agreement. Nevertheless, possessing adverse credit is likely to affect the strength of your Credit Score, which lenders use to calculate the risks and determine how much interest they should offer. So, the weaker your score the more interest you’ll be charged on any funds you withdraw, and vice versa. In addition, you can inspect your own Credit Profile with any credit agency (Experian, Equifax, Callcredit, etc.) before applying. This will give you an early opportunity to identify whether there are issues affecting your Credit Score. If there are, getting them resolved could raise your score and help you gain a more favourable interest rate, plus should you spot any irregularities, you have the opportunity to contact the credit agency concerned as soon as possible to get the issue corrected. Just remember not to do this too many times in a short period of time as this is also a factor that can negatively affect your score. Are there any other costs involved? As well as interest, you need to check whether there are any other fees involved that may affect the overall cost of finance. Although many lenders don’t charge setup costs you might be confronted with anything from commitment fees and legal costs to overdraft penalties. In order to know where you stand in this matter, inspect all documents that were provided and request a face-to-face meeting with the lender so that they can fully explain their costs. In addition, compare what other Overdraft Replacement providers may be charging. You can then use your findings to push for a lower interest rate, more favourable terms or have some of these costs reduced or negated. Does your business need fast cash relief? Making sure that your business has access to the funds it needs at short notice can feel like an impossible obstacle, especially if you’re an SME with adverse credit. Although you may have been turned down for an overdraft facility by your bank, it’s not necessarily the end of the road. By applying for an Overdraft Replacement you could establish a Line of Credit that could provide you with instant access to an agreed allowance. All you need to do decide which lender is appropriate for your business. But with so many choose from, how can you make an informed decision? Simple. If you need access to quick cash for any reason, apply for Overdraft Replacement or find out more with Rangewell.
Questions to ask when thinking about Overdraft Replacement
Although overdraft facilities can offer your business access to capital in an emergency, acquiring this form of finance from your bank has become harder in recent years, especially if you’re a developing SME. However, there is another way that your business can quickly receive the funds that it needs. Thanks to the Alternative Finance industry, you can solve this issue by with an Overdraft Replacement facility. Also referred to as Revolving Credit or Alternative Overdraft, Overdraft Replacements allow you to gain access to a Line-of-Credit (LOC) in order to instantly withdraw funds from a previously agreed allowance. Yet whilst this may sound like the right solution for your business, you need to familiarise yourself with how this type of business finance works. So if you think that your business could benefit from an Overdraft Replacement facility, some of the questions you might want to ask before applying could involve: How are Overdraft Replacements secured? How much could I borrow using Overdraft Replacement? How to qualify for Overdraft Replacement? How are Overdraft Replacements repaid? Are there any additional costs and fees? How are Overdraft Replacements secured? Overdraft Replacements can be termed as either Secured or Unsecured. With a Secured product, you’ll need to present collateral in the form of equipment, machinery, vehicles, property or stock, to act as the security against the loan. Although this boosts lender confidence in your commitment to repaying the loan on time, allowing you to receive a more attractive rate, this also means that these assets are potentially at risk of repossession should your business default. However, Unsecured Overdraft Replacements don’t require you to present collateral. This, in turn, transfers the risk back to the lender, meaning you’re likely to be offered a higher interest rate. In order to gain additional protection on an unsecured agreement, the lender may ask you to offer a Personal Guarantee expressing your commitment to fully repaying the agreement on time. Need help covering your business’ operating costs? Having trouble coping with an unexpected emergency? Apply for an Overdraft Replacement facility or learn more about your business could benefit How much can I borrow? Overdraft Replacement facilities can be used to quickly acquire an allowance for all manner of purposes, much like a business credit card. Although there’s no maximum limit to how big this allowance could be, its size will be subject to a number of factors. As well as assessing the purpose of the agreement, lenders will typically decide on a limit by reviewing your past income or the equity currently held within your stock. Therefore, by applying for Overdraft Replacement, you could quickly receive an allowance tailored to your business, regardless of what you may need it for. What are the requirements for Overdraft Replacement? As well as deciding whether or not to provide security, you’ll also need to provide certain documentation. This will help lenders gain a stronger understanding of your business and can range from proof of identity, latest/past banks statement, sales reports, profit and loss statements and collateral documents to inventory management reports or customer orders. So if you intend to apply for an Overdraft Replacement, be sure to get these documents prepared beforehand. If the lender to has to keep coming back and asking you for these documents, it’ll affect how quickly your agreement can be established. In addition, you’ll need to grant lenders permission to review your business’ credit profile and credit score. Although it won’t always be used against you, this allows lenders to assess your financial situation, see how well you’re performing and decide on an appropriate interest rate. When performing the necessary checks, lenders will look to see whether you have outstanding CCJs, arrears, Accelerated Payment Notices, existing debt and your history of paying off debt. If there are any issues, you need to be upfront. If lenders discover problems that they weren’t made aware of, it will affect the credibility of your application. As such, the weaker your credit score, the more interest you’ll need to pay on any funds that you withdraw, and vice versa. How do I repay Overdraft Replacement? Unlike other business finance products that use fixed or flexible monthly repayments, Overdraft Replacements use a Deferred Repayment scheme. You only repay (and are charged interest on) the funds that you draw. Depending on the terms of the agreement, you can fully repay the agreement within either 30 or 90 days, so you can wait until you possess the necessary funds or settle the balance immediately, whichever suits your needs. Also, once you’ve repaid the outstanding balance you can go on to immediately withdraw the funds in the allowance yet again, as it is a revolving system. Therefore, an Overdraft Repayment acts as a buffer for your business, giving you confidence and helping to achieve your goals. Are there any additional costs and fees involved? Along with interest, you need to be fully aware of whether there are any additional costs and fees that need to be paid. These can vary from arrangement fees, legal costs, administration and commitment fees to overdraft penalties. In order to make sure that you’re clear on how the product is charged, read through all documentation provided by the lender carefully. If you still have questions or there are aspects you wish the query, you can arrange a face-to-face meeting to discuss charges, helping you assess the total cost to you. Besides, doing so and checking what other Overdraft Replacement providers may be charging could give you an advantage during negotiations, helping you reduce or even negate some of these additions. Could your business benefit from using an Overdraft Replacement Facility? No matter how well your business is run, you’re bound to encounter issues at some point. But when you do, what really matters is how you react. Whether it’s a cash flow shortfall, an unexpected payment demand, out of date stock or slow growth, one way you can resolve any issues affecting your business is by applying for an Overdraft Replacement Facility. Offering your business access to a Line-of-Credit, Overdraft Replacement allows you access to the funds your business needs to remain sustainable and competitive. All you need to decide is which lender to apply to. Fortunately, we’ve already done the legwork for you. Whether you need help supporting your operating costs or investing in your business, apply for an Overdraft Replacement today, or find out more with Rangewell.
Can you use Cash Advances if you don't take credit cards?
Tending to the growth and sustainability of your SME is the focus of any business owners. Yet ensuring that our businesses continue to prosper and develop in a healthy way can be trying, there is so much to consider and often very little time. That’s why acquiring a source of external funding can prove so invaluable. If you’re looking for an agreement that’s flexible and able to mould itself around your business’ credit and debit card sales, perhaps a Merchant Cash Advance could help? But, what if your business doesn’t accept card-based transactions? Can you use Cash Advances if you don’t take credit cards? Also known as a Business Cash Advance, Merchant Cash Advance is often considered as a means of quickly accessing funding and throws a lifeline to business’ that may be suffering from poor credit. What makes this product so invaluable is that lenders typically do not pay attention to your credit score and business history, their only concern lies with your card-based sales. Consequently, applying for a Merchant Cash Advance is usually a simple process that could see decisions and funds offered in as little as 48 hours. When discussing Merchant Cash Advance there two things you need to acknowledge. Firstly, it is not a loan and, secondly, it works using your card based sales. During the application process, business lenders will request to review your latest sales reports for 3, or more, months. This will allow them to ascertain a greater understanding of your card sales, customer spending patterns and help determine whether your business can afford the product. Plus, by choosing Merchant Cash Advance your card-based sales will play an important role in every aspect of the agreement, affecting everything from the size of the lump sum you could be offered to how the product is eventually repaid. As such, if your business is unable to accept card or digital sales you will not qualify for a Merchant Cash Advance. What is the alternative solution to a Merchant Cash Advance? Although Merchant Cash Advance has one of the highest acceptance rates in the financial landscape, being rejected is still a possibility you need to aware of. If you’ve been rejected merely because your business doesn’t support card sales it can be very disappointing and frustrating. But there’s no need to worry, there is another way for your business to enjoy some of the same benefits that a Merchant Cash Advance can offer. If Merchant Cash Advance is the older brother, then a Business Revenue Advance is no doubt it’s sister product. In many ways, a Business Revenue Advance operates very closely to what you’d expect from a Merchant Cash Advance, but with one major difference. Rather than focusing solely on your card based revenue, this finance product takes into account your whole revenue. So, if your business earns around £5,000 each month but doesn’t support card sales, a Business Revenue Advance can offer the same unique flexibility you need. When applying for a Revenue Advance you will, again, need to present potential business lenders with your monthly sales reports for 3 or more months. But, instead of just looking at your card sales, they’ll be scrutinising and making decisions based on your business’ overall combined revenue. As with a Merchant Cash Advance solution, they’ll be looking to see customer spending patterns, sales strength and that the product is viable for your business. Looking for finance but don't accept card payments in your business? Find out your options today Should they agree to offer your business a Revenue Advance, the lump sum will be based on your business’ monthly sales figures. So, by using your submitted sales reports, they’ll work out an average. What this means is that if your business roughly has a revenue of £5,000 each month, the lump sum on offer will in the same region. The sum acquired can go onto to be used to grow and support your business in any way you see fit. Plus, like Merchant Cash Advance, Business Revenue Advance also offers your business Flexible Monthly Repayments but with some differences. Lenders will, again, offer your business a rate, or percentage, which will determine how you’ll need to repay them each month. For example, if you’re offered a rate of 15% and your business earns £10,000 in a particular month the amount payable will be £1,500. However, rather than automatically taking money, the lenders use your business’ sales report for that month to determine how much you need to pay. From here, you’ll then go on to transfer the sums required, giving you a greater degree of control each month. Our values are simple – We’re on your side At Rangewell, our services are clear and transparent. We support a wide range of SME businesses of every shape and size, for finding every type of finance. Follow us on Twitter and LinkedIn for business tips and tricks, and feel free to call us on 0203 637 2340 if you’d like to chat about what we can do for you.
Finding the right alternative to a revolving credit facility
It used to be that you would have to go to your bank and ask for an overdraft, but banks are now less willing than in the past to offer this type of funding. This has meat that alternative products, such as Overdraft Replacement, or Revolving Credit Facillity, have stepped in to offer business flexible access to cashflow. What actually is a Revolving Credit Facility? Before we begin looking into what you’re alternative options are, we must first understand what a Revolving Credit Facility is. In essence, it is a 3rd party account that you can quickly withdraw funds from when necessary. The lender responsible for this account will set down an allowance each month that you can use to support your business. Paying interest on anything that you borrow, if you happen to withdraw more than the specified amount you’ll be charged an overdraft fee. So if you use a credit card, you’ll find that the inner workings of this product are very similar. It’s also good to know that you are not obligated to withdraw funds. Therefore, if for one particular month you don’t use the account you won’t be required to pay for that period. What are your options? What makes this type of finance so popular is the ability to acquire quick cash, but there are also many other business finance packages that offer the same benefit. If you happen to find that using a credit facility is too constricting and unable to offer the kind of funds that you need, the alternative finance industry can help. Of the many packages on offer, two of the most popular are Invoice Factoring and Merchant Cash Advance (MCA). What is Invoice Finance? Invoice Financing can offer you fast targeted cash using the money tied up in your business’s unpaid invoices. Having customers delaying or not paying for the goods or services they’ve received can be a headache for any business owner, especially if it involves large sums. If you’re considering this type of finance, you must be aware of the two types available: Factoring and Discounting. Factoring: Invoice Factoring can offer you a lump sum equal to around 90% of each invoice’s total value and use it to support your business whilst you await payment from the customer. Plus, until the customer completes payment, you won’t be required to begin the repayment process. However, that said, lenders may choose to specify a term outlining how long they’re prepared to wait. Should this period elapse with the customer still not paying, you’ll be required to begin making repayments regardless. Discounting: Again, with this option, you’ll still acquire a lump sum, but this time it’ll be in the region 80% of each invoice’s total value. Plus, this time your customer will be required to pay directly to your finance lender. At this stage, you can either choose to be the credit controller or, if available, use your financier’s ledger service. Once they’ve received full payment from the customer, you’ll be required to transfer the remaining 20% into a facility run by the financier. After any incurred costs and fees, the sum or balance is then returned to you. What is Merchant Cash Advance? Often mistaken for a type of loan, this option uses the potential contained in your monthly credit and debit card sales. As such, in order to qualify, your business must be able to support devices such as Chip & Pin. You will be required to present any potential lenders with 3 or more consecutive sales reports, allowing lenders to gain a thorough understanding of the reliability of your card paying customers. Should they like what they see, they’ll offer to buy your revenue or receivables for one particular month. This is where a Merchant Cash Advance truly differs from a business loan. Instead of making fixed monthly payments, the lender will instead take a percentage of each of your card sales until the product has been repaid. For example, a lender might offer a rate of 18% which in turn means they’ll be taking 18p from ever £1 your card customers spend. What makes this product so popular among business owner alike is the fact that lenders do not take into account your credit score or business history; reliable card sales are all that matter. Why Rangewell? Our values are simple – We’re on your side. At Rangewell, our services are clear and transparent. We support a wide range of SME businesses of every shape and size, for finding every type of finance. Follow us on Twitter and LinkedIn for business tips and tricks, and feel free to call us on 0203 637 2340 if you’d like to chat about what we can do for you.
Banks refusing SMEs overdraft facilities
The SME community is still reeling as traditional high street banks increasingly turn their backs on them in favour of big business. Many SME businesses are facing an ever-greater challenge when it comes to acquiring overdraft facilities, a vital finance tool that grants businesses the ability to dip into an allowance during difficult periods. By being severed from this form of finance, business owners will experience an ever-increasing burden on their long-term sustainability. However, as one door closes a dozen more open. The alternative finance industry has, once again, been working to fill the gap left behind by high street banks. Plus, with the help and support provided by companies such as Rangewell, many businesses who would have been left behind are now finding the perfect finance solution to suit their needs, including Revolving Credit Facilities. Revolving Credit Facility If you’re seeking to further aid your business’s ability to cope with short-term expenses, this form of finance can prove extremely handy. For those of you who have used bank overdraft facilities in the past, you will already be familiar with the workings of this product. Revolving Credit Facilities offer your business access to an allowance, this time provided by a lender. Still under no obligation, you can withdraw money from the facility in order to pay bills, make essential purchases and so on. Any money you withdraw will be subject to interest. But, if you don’t take money out then you’ll pay nothing for that particular month. However, if you take out more than the agreed sum you’ll be hit with a penalty fee. In essence, such facilities act as a buffer for your business’s finances. Our values are simple – We’re on your side If your business is looking to get cashflow support, find out if an Alternative Overdraft would be suitable for your circumstances. Contact our team now for independent, impartial recommendations - we're on your side.
Finance Guide: Overdraft Replacement
Historically a bank overdraft has been the classic route to iron out the peaks and troughs of a businesses uneven cash flow. Since the credit crunch, however, this type of facility has become increasingly difficult to either obtain or indeed maintain at a level that is required by a business. This has led to the emergence of a new breed of lenders who provide alternative methods of funding that can either support or replace an existing overdraft. Alternatives to a traditional overdraft These alternatives cover three key products: Merchant Cash Advance – these are effectively turnover loans based on debit or credit card sales. For example, if your revenue is paid via card terminals, you will receive an advance amount based on the last few trading months. This means your repayments will be variable and more will be paid in a good month and less in a bad month with lower sales. Alternative Overdrafts – overdraft replacement products are similar to a bank overdraft and are provided by a number of specialist lenders. Generally a maximum borrowing amount is agreed based on past income and then it is up to the business how much of this limit you use and when. This is a powerful form of funding for businesses who like flexibility because you only pay interest on what you draw down and use. Often these loans are unsecured, however on occasions security may be required. Revenue Loans – revenue loans are granted and based on the analysis of a business’s most recent accounts . A loan amount is agreed and the repayments are calculated as a percentage of future monthly revenue. This ensures that a business can always afford its repayments and like merchant cash advances it is structured so repayments are higher in good times and lower in bad times. Making sure you have the right finance for your business is complex and can often be confusing. There are so many options that can seem very similar, but which when reviewed closely can be very different in terms of monthly payments, overall costs, up-front fees and terms and conditions. If you’d like to talk to one of our Business Finance Specialists: Call us on 020 3637 2455 Or email us on [email protected]