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.
Why small businesses should diversify their revenue sources
Running a small business can present many challenges, and a single-minded approach can help you overcome many of them. Having a clear vision of what you want to achieve and how you will achieve it is valuable – but that fixed vision can mean that you lose sight of the bigger picture. If your vision is based on a single income stream, you could be putting your business at risk. You could be missing out on chances to diversify – giving your business a broader base for its success and greater stability when things don’t go to plan. A single, lucrative client or successful product can seem to be all your business needs when things are going well but, in fact, it can place you at risk. You begin to rely on that fixed income stream and start to believe that you don’t need to bother with tackling fresh opportunities. You may be aware of the grim statistic that suggests that 75% of businesses that fail at launching new initiatives and markets, and decide you can afford not to take the risk of being among them – because things are fine as they are. But this approach can leave you and your business vulnerable. Clients can go elsewhere, without warning. Great products can be bettered by a competitor. A change in market conditions can mean that your best seller is not selling any more. Are you too concentrated on one revenue stream? Having one lucrative revenue stream can easily demand increasing time and focus until it takes over everything. It might be your first cherished client or customer, or it could be the income source that has been most rewarding. However, it could become an obstacle to growth and success that takes up too much of your energy and resources, leaving you little with which to take advantage of new opportunities. Once this happens it is hard to untangle yourself afterwards – and far harder than preventing it in the first place. It’s all too easy to forget the need to stay hungry and to become complacent when the revenue is flowing in, but, in business, you simply can’t rely on it continuing to do so. If your key income stream dries up you will still have to pay outgoings while working frantically to replace it. You need multiple sources of income to safeguard your business' future. Diversifying your revenue stream is essential – and we look at how it is done “By establishing and maintaining multiple streams of funding… organizations are able to avoid excessive dependence on any single revenue source, stabilize their financial positions, and thereby reduce the risk of financial crises." Peter Frumkin and Elizabeth K. Keating In Diversification Reconsidered Keep selling No matter how well things might seem to be going now, you can’t afford to be complacent that they will stay that way. The only way to safeguard against future financial crises is to continually be on the lookout for new sales to build a solid portfolio of clients and customers. Even if you are pushed for time with your existing work, you need to dedicate an hour each day to push for new sales. Set aside some time every day to capturing and chasing leads. You’ll be surprised by how much you can achieve, even if you allow an hour a day. Of course, not every call will lead to a sale, but the more calls you make, the more meetings you get and, in turn, the more sales you generate. If it takes one hundred calls to get 10 meetings and they result in just one sale, it means uphill work. But when you do make the sale you will be all the more delighted. The real message is to start on those 100 calls now. As you get better and more confident, your pitch gets cleaner, meetings more productive and your score will increase. Of course, if your resources allow for it, create a dedicated role in the team designed solely for securing new business, so that you’re looking for new sales at all times. Keep developing The competition will be tough, so make the most of your resources by developing new products or services. Look at what you do now. Could you do it better? Are there ways to cut costs, improve quality or add features? A better product is easier to sell and harder for your competitors to beat. If you are a wedding photographer you could start offering videos of the big day – or even a drone to give a birds-eye view as the bride steps out of the limo! One of the pitfalls for start-ups is that they often don’t have the resources to develop new products, but the process is vital for your survival. It can take time and experience to identify your strengths or strategic assets and find new way to use them, but it will be time well spent. So, if you run a garage servicing diesel vans, think about branching out into MOTs or even diesel passenger cars. Or take an even more radical approach and look at electrics. Developing new products or services could help you find new customers and segments to work in – or lets you find new ways to upsell to your existing customer base. Or you could jump into an entirely new market segment, with a new customer base, to take advantage of new growth potential. Look what your competitors are doing Keeping an eye on what your competition is doing is a good way to use their good ideas in your own business – and head off trouble before it hits. What are they doing that you could replicate? This will allow you to see where you can potentially add value for current customers with new products or services, or how you could use your resources better to add value or to open up an entirely new market. If your competitors bring out a new product you may need to do the same. If they are diversifying into new areas, you might need to follow their example. Looking to diversify your business offering? Contact us today to find out how we can help Be entrepreneurial It’s easy for one revenue stream to drain your energy and distract from growth – but you might be able to use the facilities and skills that let you provide it in a new way. If you run a shop, make sure you have an online presence where people can make purchases without ever having to come in. If you run a gardening business, you have a van and trailer. Could you use them to offer a rubbish removal service – or what about delivering barbecues and garden furniture? Are there any gaps in the market that might be lucrative? Is there something your customers keep searching for that you could provide? Using your knowledge of their needs can help you find untapped avenues for expansion. A broad base of revenue The ideal position to be in is to have several sources of income for your business, all of which use the same equipment and skills. Time is money of course. You need to spend the right amount of time on each revenue source. This means allocating the appropriate time and resources for each revenue stream and managing accordingly. If one particular stream becomes unmanageable you can see that you have a problem that needs resolving. But your entire revenue stream will not be on hold until you have done so. And remember, don’t let any aspect of your diversified business get to the stage where it compromises other revenue streams or other areas of the work. Diversification of funding It is not just your work itself where diversification is vital. You need to look at your financial arrangements – and at diversifying your funding. In uncertain economic times, banks are increasingly frugal with overdraft facilities and traditional forms of funding. The financial crisis of 2008 and the stagnant conditions that followed close behind it meant that high street banks raised the barriers to entry for SMEs seeking funding. Chancellor Rishi Sunak has said that he believes the post-Covid period will see the UK heading into a recession. With money in short supply, business will be slow in every sector. You may be facing plunging revenues and a slowdown that could take a year or more to be over. The time to diversify is now. Fortunately, other sources of funding emerged as financial innovation and new digital technology offered a new range of options to business owners. Funding for your business could now include peer-to-peer lending, Invoice Financing and Asset Finance – and the list goes on. Many SMEs remain unaware of the options available, fail to shop around for finance, and continue to go directly to their bank to apply for an overdraft or loan, often on unattractive terms if they can secure one at all. When it comes to business finance, diversification can mean securing higher levels of funding than might be available form a single source – and at more attractive rates. Whilst the chaos of the last decade led to more finance options, seeking diversity in funding is equally important in stable market conditions. In fact, you should be diversifying your approach to business financing during times of prosperity – because you never know when a downturn may come. In stable times, complacency can set in and many businesses rely on a low number of traditional forms of finance because they don’t foresee a situation where a lack of options can hurt them. The first step is to break down your funding requirements into immediate, medium-term and long term needs. There is always a need for short-term cash, and the easiest solution may be is the old fashioned overdraft. It may be available from your high street bank – but if not, an independent lender may be able to provide a line of credit or overdraft replacement that works in much the same way. Short-term loans can also be made available, often in a matter of days. Over the medium-term, a business can look to Asset Financing to provide them with the tools and equipment they need. For the long term, they can avoid the effects of slow-paying customers with measures such as Invoice Financing and using specialist lending – with products such as Stock Finance or Inventory Finance to make cash flow easier to manage. Technically, Invoice Finance simply lets you use your unpaid invoices as the security for lending. But, in practical terms, it means that you get paid up to 80% of an invoice as soon as you issue it, and the remainder, less the lenders costs when your customer pays. Over the long term, larger SMEs can call on commercial mortgages to buy premises or investment property. The most important thing is to get specialist expert help to ensure that you have the type of funding you need - and the most competitive source for it. How we can help At Rangewell we are experts in business funding, and we can help you not only find the solutions you need but help you find them at the most competitive rate. We can work with you to find solutions, and we know the lenders who are able to take a sympathetic view of applications from businesses who want to diversify their income streams The lenders we work with look at the whole business case presented to them for finance, and having a business downturn in the current environment need not prevent you from getting the funding you need. We’ll work with you and help you present your case to lenders. Call us now to start diversifying your business.
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.
£800,000 funding to buy an opticians practice: 95% Loan To Value Finance
Business finance is a complicated area, and many opticians will turn to a broker when they have a large-scale funding need, to help them get the deal they want. However, most brokers lack the necessary expertise in the sector - which presents some rather different challenges to most other practices, combining both a clinical practice and a retail business. This lack of expertise when it comes to understanding the industry can often result in a failure to secure the best rates. We were recently approached to provide the funding for an optician, after the brokers he had initially approached had failed to provide any finance offers after weeks of trying. Lenders find it easy to provide funding for established businesses but they can be much more reluctant to lend to a new business owner. What’s more, an optician is not simply another shop on the high street, but a professional practice with high standards, as well as a retail operation. Our client was an optician who had worked as a locum for several years, and had an excellent understanding of all aspects of managing a successful business. He now felt the time had come to run his own practice. He had found an opticians close to his home that was for sale, and believed that the business had a good location on the high street, with a turnover in the region of £200,000 a year and plenty of scope for future growth. However, when he approached banks directly they were unable to help him. He realised that finance was not his core expertise, and turned to business finance brokers for help. He provided them with a series of documents that they requested, but after two months realised that he was no closer to getting any kind of offer. He asked the selling agent who found the business he wanted for help - and he suggested that he came to Rangewell. The challenges Borrowing money to buy an existing business should be easier than finding funding for a start-up. Lenders like to reduce their risks by seeing evidence, such as accounts, that shows a business is profitable, and can afford the repayments But even buying an existing business can be more difficult for clients who have not owned a business before. The challenges did not stop there. Our client realised that he would need to re-equip to offer the standards his customers would expect. The practice he was buying needed updating with a full suite of modern diagnostic tools, including OCT, autorefractor, tonometer and a basic retinal imaging system. At Rangewell, we work to find ways around these problems. How we helped when others could not Our service is always personal, and our expert teams work closely with clients to find the answers to their needs. We have a specialist team working to provide solutions for the optician sector, and we set out to provide the answers that others could not. First, we contacted the lenders we know with the specialist knowledge to support the sector. Then, to let our client build a compelling business case, we helped him build an expert team, made up of an IFA, a solicitor and an accountant, all of whom had expert knowledge of the optician sector in the UK. Our professional approach helped us secure the offer of a Commercial Mortgage secured on the property of £800,000 at just 3.25% over 15 years. The funding Rangewell secured: £800,000 at just 3.25% over 15 years Monthly repayment £5,584.10 Annual cost £67,008 However, we did not stop there. We provide all types of funding for the sector - and helped arrange a Revolving Credit Facility that would provide £65,000 of stock for his new business. We help opticians - and other business owners - with all their funding needs. Our service is independent, fast and absolutely free - and means having an expert working to find you the financial answers you need. To find out more about what we can do for you, simply call us at Rangewell or apply today.
Fast Business Loans: what SMEs need to know
As any experienced business owner will tell you, running and maintaining your own venture isn’t easy. Of course, it can very exciting to see your idea grow and thrive, but it also involves more than its fair share of unique responsibilities and challenges. In order to maintain day-to-day operations or see key projects reach fruition, it goes without saying that having access to sufficient amounts of capital is vital. But this can pose a major stumbling block for many SMEs, especially if you need funding at short notice. Yet if you’re looking for a Fast Business Loan in order to gain access to quick cash, this needn’t be a problem, providing you know where to look. What can a Fast Business Loan be used for? At any point in your business’ develop you may run into a situation where you need access to additional capital, sometimes even at short notice. Fortunately, there are plenty of Fast Business Loans available that could help. Plus, many of these products to impose little or no usage restrictions, but are frequently used to support everything from late payments, unexpected expenses, business tax, uneven cash flow, emergencies, staff wages and supplies to projects that have gone over budget. As such, a Fast/Quick Business Loan could be an invaluable tool in your business’ arsenal. The next challenge is identifying what products are available and sourcing an agreement that’s most suitable for your business. Looking for help with supporting your business’ growth and day-to-day operations? Need additional funds at short notice? Apply for a Fast Business Loan and learn more about how your business could benefit What types of Fast Business Loans are available? Exploring the UK lending landscape can feel intimidating at the best of times. However, this is especially true if you’re looking to gain access to quick cash and are unfamiliar with how many of the finance solutions that are available work. But by holding your ground and looking deeper into what’s on offer, you may be pleasantly surprised by what you may find. So if you’re in need of a Fast Business Loan, suitable products could include Overdraft Replacement, Invoice Finance, Merchant Cash Advance or Asset Refinance. Plus, depending on your chosen product and the complexity of the request, a Fast Business Loan could offer you the funds your business needs in as little 48 hours. Therefore, before submitting an application, it’s vital that you fully understand how each of the products functions beforehand. Overdraft Replacement Overdraft Replacements can be established as either secured or unsecured agreements that can provide your business with a Line of Credit (LoC), giving you instant access to an allowance based up your past income (after an agreement has been agreed). There are no usage restrictions imposed on this allowance and you’re not obliged to make use of any of the funds that the product makes available. However, anything that you do drawdown will be charged interest will need to be fully repaid within 30 - 90 days, depending on the agreement. Plus, as soon as you’ve repaid anything that you’ve borrowed, your business will instantly regain access to this allowance on a revolving cycle. As such, Overdraft Replacement behaves very much like a credit card facility, offering your business a protective buffer. Invoice Finance Meanwhile, Invoice Finance offers you the ability to release up to 90% of the capital tied up in your business’ unpaid business-to-business (B2B) invoices, and is also not subject to any usage restrictions or borrowing limits. A secured package that uses the capital contained within your unpaid B2B invoices as collateral, Invoice Finance is most commonly available as Invoice Factoring or Invoice Discounting. Factoring: this could be a useful solution for your business if you’re able to generate an annual turnover of no less than £25,000. You also need to maintain up-to-date business ledgers and have the capacity to exercise successful credit control procedures. But, you do have the option of passing credit control duties on to the lender who will pursue the debt on your behalf whilst exercising discretion, saving you time. Once the debtor has fully repaid what they owe, the lender will make a balance available to your business. This will be the remaining amount of the invoice (e.g. the remaining 10%) minus interest and service fees. Plus, it’s also worth noting that some providers offer Bad Debt Protection as standard, protecting your business should the debtor fail to repay what they owe. Discounting: this type of Invoice Finance requires your business to generate an annual turnover of at least £100,000. You’ll also need to ensure that ledgers are all up-to-date and that you’re able to carry out successful credit control procedures. However, another key difference between Factoring and Discounting is that, with this option, the debtor pays directly into a lender-controlled facility, rather than your business. Nevertheless, when the debtor has fully resolved what they owe, the lender will, once again, release a balance to your business, minus interest and service fees. Merchant Cash Advance If you need to access quick cash but have an adverse credit rating, you may want to consider applying for a Merchant Cash Advance (MCA). Although Merchant Cash Advance is not considered a loan, it is a useful way of generating an advance for your business using your card-based (credit and debit card) revenue. As such, your business must be able to accept card-based transactions and be able to provide at least 3 or more of your latest consecutive sales reports in order to qualify. This is a vital aspect of the application process since this allows lenders to calculate your average monthly card-based revenue, which determines the size of the advance. So if you regularly generate around £35,000 in card sales, for example, you could receive an advance in the same region, if necessary. Although Merchant Cash Advance is unsecured, lenders pay little or no attention to your credit rating when making a decision. This is because this type of funding uses a Flexible Monthly Repayment scheme that allows lenders to automatically intercept an agreed percentage (sweep rate) of your card-based revenue until the agreement has been fully repaid. Asset Refinance Finally, if you own any unencumbered assets (equipment, machinery or vehicles) that aren’t fixed into the structure of your premises, applying for Asset Refinance could enable you to release up to 100% of the equity they contain in order to generate a lump sum. This lump sum is also not subject to any usage restriction or credit limits other than what the lender is willing, or able, to provide. In addition, this finance solution also offers terms lasting up to 5 years, during which you're required to make Fixed Monthly Repayments, plus interest. Although this is a useful way of generating funds, you need to be aware that Asset Refinance is a form of secured asset-based lending. Therefore, if your business falls behind in the repayment scheme and defaults, the lender will gain the right to repossess these assets. Looking for a fast way of raising funds for your business? Raising funds for your business is vital for driving growth and maintaining successful day-to-day operations. However, despite the necessity, making sure that your business has access to sufficient amounts of capital as and when its required can prove challenging. But if you need funding at short notice, the Alternative Finance Industry is opening the doors to more Fast Business Loans than ever before. The issue is that you may not be aware of what of funding opportunities are available and how they work. Fortunately, help is at hand. At Rangewell, we’re an Access to Finance specialist and have mapped over 400 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 you through the application process. So if you’re looking to raise capital for your business at short notice, apply for a Fast Business Loan today or find out more with Rangewell.
Financing your business' tax bills
Although it’s a mandatory requirement of operating in the UK, many SMEs and established firms still struggle to resolve their business' tax obligations on time. Coupled with your other monthly expenses, its arrival places additional pressure upon your finances, which may affect your ability to operate and grow. Nevertheless, HMRC will pursue anyone who has failed to pay their business tax on time, which will result in you being taken to court and being issued with an Accelerated Payment Notice that needs to be resolved within 90 days. But if you are struggling to pay down your tax obligations, Tax Finance presents you with a number of finance solutions that could help. Changes to the way in which business can be paid If you’re thinking of using your personal credit cards to pay off your business tax, think again. HMRC is no longer accepting payments from personal credit cards, which may prove an issue if you’ve got upcoming rental demands, staff wages, insurance premiums or any other expenses to worry about. Although the move is aimed to help HMRC avoid passing on the cost of credit processing fees on to the general public, it adds yet another unwelcome obstacle for SME owners. But, if you do lack the means to resolve your business’ taxes on time without resorting to your personal credit card, know that there is another way. Applying for VAT and Tax Finance could show you the way forward. Do you have an upcoming business tax bill that needs paying? Need help raising the necessary capital? Apply for VAT & Tax Finance and learn more about how your business could benefit. What is VAT and Tax Finance? Receiving your business tax bill from HMRC is never a welcome sight. Although you can predict when it will arrive, it’s easy to underestimate how much it will cost. But rather than let your business struggle whilst you keep a lid on your other expenses, which could have lasting consequences, you could safeguard your business’ future with VAT and Tax Finance. VAT and Tax Finance is a package designed to give you access to an variety of different finance solutions that could ease the pressure on your finances, helping you stay on top of them and any other obligations in complete confidence. So by choosing this package, you could gain access to anything from Merchant Cash Advance and Overdraft Replacement to Invoice Finance. Merchant Cash Advance A short-term, unsecured finance solution, Merchant Cash Advance enables you to receive an advance based upon your future, predicted card sales. So in order to apply, your business must have the capacity to accept credit and debit payments and you will need 3 or more of your latest consecutive sales reports. Using your reports, lenders will work out an average of how much your business earns each month. So, for example, if you generate £25,000 in card-based revenue, you could receive an advance for a similar amount, if you require it. Plus, Merchant Cash Advance is repaid using flexible monthly repayments which grants a lender the ability to automatically intercept an agreed percentage from each of card sale until the debt has been fully repaid. However, your cash-based revenue is unaffected. Overdraft Replacement If you’re looking to raise funds for an upcoming tax bill, Overdraft Replacement gives you access to a line of credit which provides you with an allowance based upon your previous income. Plus, you’re not required to make use of any of these funds but anything that you do use will be subject to interest and needs to be fully repaid within 30 to 90 days, depending on the agreement. Once you’ve repaid what you’ve borrowed, you’ll regain access to the allowance and will be able to withdraw and repay funds on a revolving cycle, much like a personal credit card. Invoice Finance Meanwhile, Invoice Finance allows you to harness the funds tied up in your business’ unpaid business-to-business (B2B) invoices. So regardless of whether the customer is late in paying up or you need the money sooner than expected, you could release up to 90% of the capital held within any invoice. In order to qualify, your business must be able to maintain up-to-date ledgers and, depending on the agreement, exercise sufficient credit control processes. Nevertheless, there are two types of Invoice Finance available: Factoring and Discounting. Factoring: requires your business to have a minimum turnover of no less than £100,000. However, using this option does allow you to let the lender pursue the debtor on your behalf, whilst being confidential about the fact that you’re using their services. In addition, some lenders may provide bad debt protection as standard, safeguarding your business in the event that the debtor doesn’t pay or falls into liquidation. Once the debt has been repaid, the lender will release a balance (e.g. the remaining 10%) minus costs and fees. Discounting: this requires your business to have an annual turnover in excess of £25,000 and be able to collect the debt using your own credit control procedures. Instead of the debtor paying your business, they’ll pay directly into a lender-controlled facility. Once the debt has been repaid, the lender will release a balance (e.g. the remaining 10%) minus costs and fees. Need help staying on top of your business tax? Every year millions of UK businesses are required by law to pay business tax if they’re to continue operating. Yet despite being a vital aspect of running your own business, it doesn’t make it any easier when the time comes. But rather than allow your business to struggle and fall into an even worse financial situation, you could take back control of the situation by applying for VAT and Tax Finance. All you need to do now is source an appropriate agreement for your business from a lender you can trust. At Rangewell, we’re an Access to Finance specialist who have mapped over 400 lenders to offer you a comprehensive overview of more than 23,000 business finance products. Our services are free to use and we’ll also guide you through the application process. So if you’re looking to finance your next tax bill, apply for Vat and Tax Finance today or find out more with Rangewell.
Things to watch out for when dealing with Overdraft Replacement facilities
One of the most fickle aspects of running a successful business is ensuring that your cash flow is reliable and can support your operating costs and growth aspirations. But if you were to run into a cashflow shortfall or other unexpected expense, the pressure this may place upon your working capital could make achieving your short- or long-term goals challenging. However, there’s one business finance solution that could help. Overdraft Replacement offers your business access to a Line of Credit that enables you to withdraw funds from an allowance for a wide range of purposes. Yet, although Overdraft Replacement can be a useful short-term finance solution to use, there are aspects that you need to be aware of in order to make an informed decision. So before applying for an Overdraft Replacement, you must consider: How much are you allowed to borrow? How much interest is involved? What additional costs and fees are there? How much can my business borrow? When using an Overdraft Replacement facility you receive a Line of Credit that allows you to withdraw funds from an allowance. Although you can to borrow any amount you wish from this allowance, it does have a credit limit which is usually determined by your business’ past income. If you happen to withdraw more money than what was agreed you’ll incur an overdraft penalty as a result, which will add to the overall cost of finance. So despite being able to use these funds for a wide range of purposes, if your business requires access to more money than what the allowance allows, you might find this type of finance restrictive. Have you run into a slow trading period? Need help meeting your financial commitments? Apply for Overdraft Replacement or learn more about how your business could benefit. How much interest is charged with Overdraft Replacement? With an Overdraft Replacement facility, you only repay and get charged interest on the funds that you’ve withdrawn. It is also worth remembering that you are also under no obligation to make use of any of these funds. However, Overdraft Replacement facilities typically come with a high interest rate attached, which is also determined by the strength of your business’ credit score. Plus, like a credit card, you have 30 - 90 days to fully repay the money that you’ve borrowed. Therefore, Overdraft Replacement should be considered as a short-term solution with funds only being withdrawn if you have a credible means of repaying them, and there’s a strong case for doing so. Are there additional charges that I need to be aware of when using Overdraft Replacement? As well as interest, you may encounter a number of additionals costs and fees, which tend to vary from lender to lender. These can range from arrangement fees, legal costs, administration, commitment fees to overdraft penalties. So before entering any potential agreements, you need to make sure that you’re fully aware of all the costs that may be involved and how they’re calculated. These should be outlined in the documents provided by the lender, but if you have queries you can request to have them explained to you in a face-to-face meeting. Doing so will give you the added advantage of being able to compare to products from different lenders and use these findings to reduce or negate these costs during negotiations. Still thinking that your business could benefit from an Overdraft Replacement? If your business is currently experiencing a cashflow shortfall that’s affecting your finances and ability to invest, Overdraft Replacement is still a great way of keeping your business afloat. But if you’re still unsure or have further question, you should seek out the services of qualified finance professionals. At Rangewell, we working over 350 lenders to give you an in-depth overview of more 23,000 business finance products. Our services are free to use and impartial. We’ll also guide you through each stage of the application, helping you acquire an agreement that’s appropriate for your business needs. So if you need help supporting your operating costs or investing in your business, apply for an Overdraft Replacement today, or find out more with Rangewell.
3 reasons to grow your business with overdraft replacement
As a developing SME owner, your ability to stimulate and fund growth may be limited and, during certain trading periods, your income could become constrained. This could make living up to financial obligations and growth aspirations a daunting prospect, prompting you to seek financial assistance. Although your initial instinct might be to establish an Overdraft Facility which will work in conjunction with your existing banking arrangements, such facilities have become harder to obtain. This is why more and more SME owners are using Overdraft Replacement. A short-term form of business finance, Overdraft Replacement offers your business a Line of Credit that can be used to support any aspect of your business, including growth. So if you’re hoping to make a start on a long-awaited growth project or need help seeing an existing one through to the end, here’s why you should consider applying for an Overdraft Replacement. Cash when you need it No usage restrictions Manageable repayment process How much money could my business borrow through Overdraft Replacement? Overdraft Replacement, also known as Alternative Overdraft or Revolving Credit, presents your business with a Line of Credit from which you can withdraw an allowance. The size of this allowance is usually determined by your business’ past income and can be drawn upon instantly as soon as an agreement has been reached. Although you’re under no obligation to use any of this allowance, the amount that you do choose to withdraw is entirely up to you. However, it’s worth noting that if you withdraw more than the credit limit imposed, you’ll incur an overdraft penalty as a result. Therefore, Overdraft Replacement provides you with the means to access external funds whenever the need arises. Need help supporting your growth aspirations? Looking to smooth out your business’ cash flow? Apply for an Overdraft Replacement or learn more about how your business could benefit! How can I grow my business with Overdraft Replacement? Because Overdraft Replacement facilities have no usage restrictions dictating how the allowance can be used, the ways in which the agreement can be used to your business’ benefit are numerous. So if you’re looking to grow your business using Overdraft Replacement, some of the ways it can help include purchasing equipment, obtaining machinery, expanding your fleet, building extensions or carrying out refurbishments. In addition, Overdraft Replacement can also be used to smooth out uneven cash flow during slow trading periods by covering your operating costs and any other relevant expenses. As such, an Overdraft Replacement can help your business pay staff and contractors, bring in fresh stock, acquire additional supplies, settle utility bills, resolve Accelerated Payment Notices, building constructions to unexpected emergencies. Therefore, applying for an Overdraft Replacement can help reinforce the foundations of your business’ finances, offering you the confidence to go and pursue your growth aspirations. How affordable is an Overdraft Replacement facility? Overdraft Replacements offer you a flexible means of borrowing and repaying money for business and stimulating growth. Like a credit card, you only repay and are charged interest on the money that you have borrowed. If you have chosen to withdraw any of the funds that were made available to your business, you can either repay it instantly or anywhere within 30 - 90 days. For many SMEs, this is often perceived as a convenient and affordable repayment method which allows you to defer the debt, giving you ample opportunity to amass the necessary funds. Thinking about applying for Overdraft Replacement? Making sure that your business has the ability to grow and remain sustainable isn’t easy. It takes dedication, planning, many hours of hard work and sufficient funding. But if you were to hit a slow trading period, the issues this could cause for your finances and working capital may force you to postpone or even cancel any plans that you might have had for growing your business. However, cashflow needn’t be a problem for your business, not with Overdraft Replacement at hand. Overdraft Replacement provides you with a Line of Credit that enables you to shore up business’ finances, putting you in a much stronger position to go and support any growth project you want to start or complete. So if you’re looking to purchase equipment, pay staff wage or support each stage of an essential construction project, apply for Overdraft Replacement today or find out more with Rangewell.
Benefits of Overdraft Replacement
Need help managing your finances or coping with an unexpected expense? Your first reaction might be to contact your bank and arrange an Overdraft Facility to fit around your current banking arrangements. However, although it is a useful short-term finance solution, this particular form of financing has become increasingly difficult to obtain. This is why more and more SMEs are choosing to apply for Overdraft Replacement instead. Overdraft Replacements, or Alternative Overdrafts, are another form of short-term business finance that offers your business access to Line of Credit, without the need to involve your bank account. So if you’re looking for a short-term term finance solution to help resolve uneven cash flow, settle operating costs or fund existing business projects, here’s why you should consider applying for an Overdraft Replacement. Offers access to a Line of Credit No usage restrictions Flexible Criteria Deferred repayments How much money could my business borrow through using an Overdraft Replacement? An Overdraft Replacement facility offers your business access to a Line of Credit that enables you to instantly withdraw funds from an agreed allowance, much like a credit card. This allowance has a credit limit which is based upon your business’ past income. In addition, you’re under no obligation to use any of these funds and are free to decide how much to withdraw. Therefore, you can use these funds as and when the need arises, providing you don’t exceed your credit limit as doing so may incur an overdraft penalty. Looking for a way to smooth out uneven cash flow? Or are looking to support your operating costs? Apply for Overdraft Replacement, or learn more with Rangewell. What can Overdraft Replacement be used for? Overdraft Replacements are short-term business finance solutions that typically do not carry any usage restrictions. Although this means it can be used to provide funds to any area of your business, many SME owners typically use this form of finance to pay staff, settle utility bills, meet tax demands, finance inventory, fund project phases, or any other operating expense. Therefore, how you decide to use these funds is entirely up to you, and giving you room to manoeuvre when you need it most. What does my business need in order to qualify for an Overdraft Replacement? Overdraft Replacement can be either secured or unsecured, meaning they are suitable for a range of financial situations. Secured agreements typically use assets such as equipment, machinery, vehicles or stock as collateral, which, in turn, gives lenders greater confidence to provide a larger credit limit and more favourable terms. On the other hand, unsecured solutions don't require you to present collateral but can be more difficult to obtain as a result. But, nevertheless, if you would prefer an unsecured product, you may need to offer a Personal Guarantee in order to earn the lender’s confidence. In addition, you’ll need to provide lenders with a number of documents to support your application. This allows lenders to gain a stronger understanding of your business’ financial situation and how you operate. Just some of the documents you may need to provide can range from your latest/past bank's statement, your business' Profit and Loss statements, sales reports, collateral documents and inventory management reports to customer orders. Plus, you’ll also need to give lenders' permission to review your business' credit profile and credit score. Lenders often review this in order to determine the risks that are involved and the likelihood of your business repaying (or not) the funds that have been withdrawn on time. As such, some of the factors they’ll look into will include whether you have any outstanding CCJs, Arrears, Accelerated Payment Notices and if you have a reliable history settling your debts. If there are any issues, be upfront about them. Should the lender discover any issues that weren't disclosed by you initially, it may affect the credibility of your application. Although possessing a weak credit score won’t always be used against you, it may affect the interest rate you’re offered. Therefore, the stronger your credit score the less interest you’ll need to pay, and vice versa. How does my business repay an Overdraft Replacement? When settling an Overdraft Replacement, you only repay and get charged interest on the funds that you’ve withdrawn. Plus, you can fully repay the funds that you’ve borrowed straight away if you prefer, but many agreements look to you doing so inside 30 - 90 days. Once they’ve been repaid, you can go on to withdraw and repay these funds on a revolving cycle, ensuring that you always have instant access to external funding. Therefore, this feature allows Overdraft Repayments to act as a buffer which gives you the confidence to achieve your goals, even during the most trying of times. Looking to apply for an Overdraft Replacement? Whether you’re looking to smooth out your cash flow, support an ongoing project or cover an unexpected expense, applying for an Overdraft Replacement facility could provide the answer. Offering your business access to an allowance, Overdraft Replacement offers you the confidence and the means to pursue all of your goals. All you need to decide is which lender to apply to. Thankfully, we’ve already done the hard work for you. So, if you’re looking for a short-term finance solution which will grant you access to a Line of Credit for any purpose, apply for an Overdraft Replacement today, or find out more with Rangewell.
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.
The smarter solution: Revolving Credit for the Fashion Industry
The fashion industry remains one of the great British success stories. The whole world watches the leading British designers, and the twice-annual London Fashion Week is arguably the industry’s biggest, with estimated orders of over £100 million. These events, where more than 250 top UK designers showcase their collections, reflect the importance of Spring/Summer and Autumn/Winter collections for both the Haute Couture and high street ends of the fashion business. If a design house is to succeed, it must be able to provide these two collections each year and, in the case of many smaller operations, this will mean not just creating designs that will create interest and orders but preparing stock for sale through selected outlets. The industry works with a six-month lead time, beginning work on each collection before the previous season's range has reached the retailers. A big financial burden This workflow presents a sizable financial burden for independent designers. “If a large retailer is selling your collection, they will invest in its manufacture. If you are producing made to measure, it is all handcraft. But for those of us in the middle, we have to pay for the team that turns sketches and concepts into designs, and for those designs to be turned into stock that is ready to sell.” Even for smaller designers, the costs involved are substantial. Tying up investment in designs and stock for six months at a time requires a major investment, at a time when relatively little income will be coming in. It can mean restricting the growth of a successful design label - and while there is a place for exclusivity, designers expect to use small numbers to create demand, not restrict sales and revenue. Finding a versatile solution One designer with a growing reputation came to Rangewell to provide a financial solution which could offer the chance to support growth too. “We were getting more interest each season, and we need to sell to it. We don’t expect to compete with high street retailers, but we do want to see our collection in more top-end retailers. That means we need to produce more garments each time, of course, without sacrificing quality.” The business was cash-rich after each collection was sold, but in the run-up to the next season, they frequently found that funds were depleted. “We manufacture in the UK. It is part of our brand values and one of the reasons why people love our clothes. It also means we can practically look over shoulders to ensure we get the quality we need. But it means our costs can be a little higher than the industry average.” With many sectors, the answer for cash flow issues is Invoice Finance, where a lender will advance funds based on the value of invoices as they are issued. This means that the manufacturing business can have income when each batch is shipped. For our client, and the fashion industry, this would be less suitable, as a collection will not be released for months. We saw that another solution would be necessary to provide the funding that the client needed. In the past, it was common for fashion houses and many other businesses to use bank overdrafts to fill cash gaps. These were a versatile and very flexible arrangement that would allow account holders to withdraw cash that you didn’t have in your account as a loan. This could be used for a few days or a few weeks, or to deal with larger expenses. It was convenient, with no need for an application, and cost-effective - the bank would only charge for the cash withdrawn, and for the time they used it. However, since the financial crisis, new bank rules mean that the traditional overdraft may now be very difficult to obtain. Do you need to replace a traditional overdraft? Do you want a reserve of credit to call on as you need it? Find out more about Revolving Credit Facilities or apply now. Fortunately, the Alternative Finance market has grown to plug this gap with new funding solutions to offer the short-term funding that used to be provided by overdrafts. This includes Revolving Credit, also known as Overdraft Replacement. With Overdraft Replacement no bank account is involved. Instead, the arrangement provides a line of credit and it is up to you how much of this reserve of credit you use. Like an overdraft, it will only mean a cost to you when you actually use the facility, based on the amount you draw down and the time that you hold it. You can repay what you daw down at any time, and the funds will be ready for use again. We realised that this facility could be the perfect answer for our client, offering funds as her business depleted its own reserves, and allowing her to repay when new reserves came in. “I didn’t want to take out a loan that would saddle me with monthly repayments - that would only make our cash problems worse. But a line of credit we could dip into when we needed to would be the perfect answer.” £100,000 on demand We helped arrange a line of credit with a reserve of £100,000. Rates will differ greatly between providers, so we searched the market for the most attractive arrangement, from a lender which understood the fashion industry. It has already proved the answer to our client’s needs. It allowed her business to increase the number of several key designs for the last season, leading, ultimately, to increased sales and higher returns overall. “This is a very competitive business, and you can’t stay in front of the fashion industry without the right funding. I am now certain that we have it.” If your business faces short-term financial challenges, find out more about Revolving Credit or call the Rangewell team today.
Overdraft: Advantages and Disadvantages
Nothing is more rewarding than seeing your business grow and achieve a prosperous future. But in order to do so, you need access to enough capital, which can be difficult, especially at short notice. However, one way of achieving short-term access to cash is by applying for a Bank Overdraft. Bank Overdrafts are often considered a fast and efficient way of borrowing money for a wide range of purposes. Yet, in order to know whether this product is right for your business before placing an application, you need to be fully aware of the advantages and disadvantages of Bank Overdrafts. Advantages of Bank Overdrafts Working very much like a credit card facility, Bank Overdrafts offer a variety of advantages. For many business owners, what makes this form of lending such an invaluable tool is the flexibility and reassurance that it offers. It works by offering your business a Line-of-Credit (LoC) which is, essentially, an allowance with a credit limited based upon your past income. Another great advantage of Bank Overdraft is that this allowance is also subject to little or no usage restrictions, enabling you to draw down funds for a wide variety of purposes, including working capital expenses, tax demands, staff wages, repairing damaged equipment, supporting uneven cash flow, replenishing supplies, funding existing projects or even providing access to emergency funding in times of emergency. Another advantage of this type of funding is that you’re under no obligation to use any of the funds that are available, meaning that you can make use of the Overdraft Facility without any pressure from the bank to do so. In addition, once you’ve fully repaid the funds that have been withdrawn, you’ll regain access to the full allowance, enabling you to instantly draw down and repay funds on a revolving cycle. As such, the advantage of a Bank Overdraft is that it acts as a protective buffer for your business’ finances. Looking to raise funds for your business? Need capital at short notice? Apply for an Alternative Overdraft Replacement or learn more about how your business could benefit. Disadvantages of Bank Overdrafts On the other hand, although there are plenty of Bank Overdraft advantages to speak of, this product also has its fair share of constraints that you need to be aware of as well. For one, in order to qualify for a Bank Overdraft, you may be required to have an account with the bank that you’re applying to. Plus, even if you do, banks generally tend to impose strict application requirements which could be an issue if you’re an SME with a limited trading history, adverse credit or a lack of sufficient assets (equipment, machinery, vehicles or property) to support your request. Also, because the allowance is based on your business’ past income, a Bank Overdraft might not be suitable if you need to borrow more than what your business has been generating in revenue. You’ll also be charged interest on the overdraft (amount withdrawn) for each day that it’s in use. As such, repaying it as soon as you’re able to would be in your benefit. Another disadvantage of Bank Overdrafts is that after repaying the funds that you’ve borrowed, you may need to renegotiate the limit of the allowance periodically in order to ensure that you have access to a sufficient amount of support when required in future, since the bank may choose to occasionally review the credit limit. This is an important factor to consider since if you go beyond the credit limit you’ll be charged an Overdraft Penalty, which will also be subject to interest. Plus, because Bank Overdrafts are usually Secured agreements, your business’ assets are at risk of repossession should you fail to repay what you’ve borrowed on time. Alternative Overdraft Replacement However, if you’re thinking about seizing upon the advantages of Bank Overdraft facilities, you don’t necessarily need to go through your bank. In fact, because of the growing prominence of the Alternative Finance industry, more and more business owners are gaining access to a variety of business finance agreements that may not be on offer with their bank, including Overdraft Replacement. Overdraft Replacement works in the same way as a Bank Overdraft, but expands on the advantages and doesn’t require you to set up an account since you’re given access to a lender-controlled facility. As such, you could be approved in as little as 48 hours, depending on the complexity of your request. So if this sounds like the type of funding that your business stands to benefit from, all you need to do is source an agreement from a lender you can trust, which is where we can help. Looking to raise money for your business? Raising capital for your business is a crucial responsibility that you can’t afford to overlook. The problem is that capital isn’t easy to come by, especially in large amounts or at short notice. So in order to overcome this issue, you may decide to apply for a Bank Overdraft. However, with many financial institutions preferring to deal with big business, getting accepted may not be easy. Instead, you might want to think outside the box and explore what the Alternative Finance Industry has to offer, such as Overdraft Replacement. The only obstacle standing in your way is sourcing a suitable agreement from a reputable lender, which is where speaking with a qualified business finance professional could prove invaluable. At Rangewell, we’re an Access to Finance specialist who’s mapped over 400 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 you through the application process. So if you’re looking to raise funds for your business at short notice, apply for an Alternative Overdraft Replacement today or find out more with Rangewell.