Advisory

Alternative business finance options to introduce to your clients right now

18 Nov 2022

Although some of your clients might struggle to get a loan from their business bank, there are a wealth of alternative options to choose from. Some even offer greater flexibility when it comes to guarantees and repayment terms.

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In an article about the growth of alternative finance, Funding Options’ CEO, Simon Cureton argued that longevity in the market doesn’t always equal quality and speed. 

“Clearly, even if a lender has a century worth of experience, it means nothing if it can’t react quickly in order to support its customers,” he said. 

From finance for equipment to funding sustainability, let's take a look at the alternative funding options your clients could benefit from in the months ahead. 

1. Invoice finance

Invoice finance is designed to help businesses that invoice clients to manage their cash flow by releasing funds tied up in unpaid invoices. 

It works by the lender essentially ‘buys’ the unpaid invoice (or invoices), and releases a percentage of the value immediately. The business gets the remaining amount owed when the client settles their account, minus a lender fee.

2. Asset finance

Asset finance is a broad term that falls into two main categories. 

One provides businesses with equipment they need without having to purchase it outright. Equipment leasing and hire purchase are two types of asset finance that can be used to obtain almost anything, from a commercial fridge to a tractor. 

The other is asset refinance, where a business uses its balance sheet items, such as property or machinery, as security for business finance. 

3. Merchant cash advances

If you have a client who requires a cash injection and takes customer card payments, they might be interested in exploring merchant cash advances

A merchant cash advance provides a business with a cash injection which they pay back through a percentage (typically 10%) of their customer card payments. 

4. Bridging finance 

Bridging finance is often associated with property purchases, and can be used to cover the costs of a property purchase before the borrower’s existing one is sold. But it can be used for other business purposes too. A bridge loan could provide your client with a quick cash injection while they wait for longer term funding to eventuate. 

5. Revolving credit facility 

A revolving credit facility lets a business use funding, repay it and use it again as and when is needed. It’s more flexible than a standard term loan in this sense. 

If your client takes out this type of finance, they will only pay interest on what they use. They don’t have to use the full amount either. For example they might have a facility of £5,000 and use £3,000 to buy stock ahead of a seasonal spike.  

6. Property development finance 

Do you have a client who is considering growing their property portfolio?

Property development finance is a broad term that covers funding for building and development costs. Every applicant is considered on an individual basis, and your client’s exit strategy will be a key part of their application process, 

7. Peer-to-peer lending

Peer-to-peer (P2P) lending is a form of alternative business finance that enables private investors to lend to businesses through a P2P platform. The idea is that both the lender and borrower get a better rate than they would do through a bank. 

8. Term loans 

Business term loans, where the company borrows money and pays it back – plus interest – in regular instalments for a set duration, are the most common type of finance. 

Secured business loans require security, such as a property or equipment the business owns. Unsecured business loans don’t, but they may still require a personal guarantee

9. Green lending

Green finance is a new and exciting form of alternative business finance that is designed to fund environmentally friendly businesses and projects. 

Green loans can be used to buy items such as electric vehicles, solar panels, and biomass boilers, or to fund the development of ‘green’ products and services. 

Sign up to FC: Connect

Accountants and business advisors are invited to join our advisory platform, Funding Cloud: Connect. By signing up, you’ll be able to help your clients navigate the SME lending landscape and provide them with the tools they need to access the finance options listed above and other types of business funding, too.

After you’ve made an account, you can start referring clients using your personalised link, and manage and track all of your referrals via a dedicated dashboard. 

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