If you are trying and finding it difficult to secure funding for your small business, you are not alone. It’s a common problem faced by many SMEs and start-ups as many high street lenders are reluctant to invest money because they are simply not making enough profit or are just considered a risk in general.
While a small business is trying to get a measure of success and make some sales or secure projects and work, they also tend to need money to achieve that. If you have a startup or a small business and are struggling to secure the necessary financing you need, then we hope the following post can be of help as we look at the main options available for fast finance.
Why small businesses often require fast finance
Time is a huge factor in the successfulness of a business. With each day you are unable to operate to the level you need, you are losing clients, customers and business. Business that could help provide you with the cash flow you need to stay afloat. This is why so many businesses turn to fast finance options. It means they don’t need to wait around until they’ve made enough in profits to put money into the business.
What lending options are available to SMEs?
Fortunately, there are a number of fast finance options available for SMEs who can’t secure more comprehensive forms of lending. They are:
- Invoice lending – This form of fast finance involves borrowing money against invoices your company has issued. It can help to improve cashflow, pay suppliers and employees and in growth and operations faster and earlier than you’d be able to if you waited for your customers to pay their invoices.
- Short term loans – Short term loans involve borrowing money that is paid back along with a high rate of interest in less than a year. This is different from a traditional long-term bank loan, because you are not locked into paying it back over a long period of time. The loan can last anywhere from 3 months to a year. Annual interest can vary considerably depending on your type of business and the lender – typically the interest rate sits between 5-10%.
- Cash flow loans – With cash flow loans a loan is given to a company based on the cash flow they are expected to generate over a particular period. The actual repayment structure and schedule is highly dependant on cash flow. Generally, though, these are repaid in even quicker time than short term loans. The biggest advantage of these loans is that they are easier and quicker to get than other options. With a large percentage of small business taking out loans to cover cash flow, these type of loans are popular.
- Asset finance – Asset Finance – Asset finance is a quick way to get the money you need for vehicles, machinery or equipment and is beneficial because it gives you access to the equity you already have but is locked up in assets. Assets can typically be financed from anywhere from 12 months to 5 years to provide you with the cash needed in your business. Asset finance can also be used as a way to refinance existing assets and access the equity of the assets on your balance sheet.
Finding fast finance is a problem most small businesses face, because of the risk they pose in the eyes of traditional lenders. Hopefully, though, if you currently find yourself in that position, we have helped introduce you to some alternative options beyond the conventional bank loan.