Small Business Funding Options When the Banks Say No!

Small business owners often find it difficult to secure traditional finance and funding from banks and other lenders, and with many of them tightening their lending criteria and government covid support ending, it’s leaving small businesses feeling stuck and with no way to grow their business.

Why are Traditional Lenders Shunning Small Businesses?

One of the biggest problems small businesses in the UK are facing at the moment is a lack of access to finance. In the wake of Covid and the knock-on financial crisis that has followed, banks have become much more risk-averse when it comes to lending money. Criteria that small businesses have to meet have become ever more stringent. Small businesses can be refused bank loans or additional funding due to several factors including:

  • Their business model: Banks are often looking for a business with a more traditional model, with stable cash flows and lots of assets.
  • The amount of money they need: Traditional lenders often have set lending limits which may be too low for the needs of some small businesses.
  • Their turnover: Banks typically like to see a business with a higher turnover as this is often seen to be less of a risk.
  • Their credit score: A small business’ credit score is often used as one of the main criteria for deciding whether or not to lend them money. If a small business has any kind of adverse credit history, this can be enough to put the bank off.
  • The amount of collateral they have to offer: Banks will often require some form of security or collateral before they lend money to a small business. This could be in the form of property, equipment, or even personal assets such as a home.
  • Not enough capital: Small businesses are often turned down for finance because they don’t have enough capital. This can be a chicken and egg situation as you need finance in order to grow and generate more capital.
  • Cash Flow isn’t stable or strong enough: small businesses need to have a good cash flow to be able to repay loans or finance. If a small business doesn’t have a strong enough cash flow, a bank will not lend them any money.

All of these factors can make it exceedingly difficult for small businesses to get the funding they need from banks and other traditional lenders, leaving many small businesses feeling stuck and unsure of where to turn next. Some small business owners will even resort to using their personal savings or relying on family and friends for loans.

However, there is one solid viable solution that is becoming increasingly popular with small businesses who want to secure funding quickly and without hassle: Invoice Finance.

What Is Invoice Finance & How Does It Work?

Invoice finance is a type of funding that allows businesses to access cash tied up in their unpaid invoices. It works by businesses selling their outstanding invoices to a lender at a discount. The lender then pays the business an advance of up to 90% of the value of the invoice, with the remaining balance (less the lender’s fee) paid when the customer pays the invoice in full.

Invoice finance is a viable alternative to traditional business loans. If your business is struggling to secure finance from traditional lenders, invoice finance could be the perfect solution. Invoice Finance benefits include:

  • Access to cash quickly.
  • No need to wait 30, 60, 90 days or more for customers to pay.
  • The ability to free up time spent chasing late payments.
  • Improve your business cash flow and working capital.
  • Easy to access with a straightforward and short application process.
  • It’s flexible; you choose which customers you want to factor.
  • No asset or collateral requirements.

And finally, let’s dispel the myth straight away that invoice finance is the last choice for businesses looking to raise finance. In fact, for many, it can and should be the first choice.

Ready to Give Invoice Finance a Try?

Invoice finance can also be used to help small businesses manage peaks and troughs in their cash flow, as it provides a steady stream of working capital that can be used to cover things like wages, rent and suppliers. It is also a great solution to help with the growth of your business.

If you’re looking to free up some cash flow to invest back into your business or looking for a way to bridge the gap between your customers paying their invoices and you receiving the payment contact us today.