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How alternative finance is helping UK businesses to grow

“The bank wouldn’t lend my business the money it needs to grow” is one of the most common grumbles among business owners.
10 January, 2014

Realising the potential of any business is often found in accessing the right finance at the right time. Taking calculated risks to acquire another business, employ people or purchase key assets can be the difference between growing and standing still.

The alternative finance industry realises this and has pioneered new ways of raising finance to help ambitious firms take the next step – by raising finance from individuals who share the same perspective and want to earn a better return than can be found through traditional bank savings products.

They’re doing it faster, making it easy for firms to apply and innovating all the time to create the right products for businesses and investors to make the market grow – it’s forecast to be a £12bn industry in the future.

There’s now finance available for every stage of the SME journey from places other than your bank:

Seed Finance:

Equity crowdfunding sites are enabling investors to buy shares in private companies through an online platform. Perfect for early stage businesses with a mass-market product, Crowdcube and Seedrs (there are more sites springing up all the time) allow business owners to market their products to experienced investors who pledge funds towards a target in return for a minority shareholding. 

Invoice Finance:

Companies that supply to blue chip firms can find payment periods of 60 and even 90 days can be a burden on their cashflow. Pioneers like Market Invoice and Platform Black realise this and also that blue chip firms are almost certain to settle the invoice, eventually. For this reason their investors will buy invoices for the vast majority of its value up front, advancing the rest minus a fee when the invoice is settled. 

This releases cash back into the business, allowing the company to meet other orders without borrowing cash to cover the shortfall. Invoices can be one-off invoices too, which avoids the factoring vicious circle.

Business Loans:

The business loan market has been revitalised. Replacing risk averse banks are lean and agile competitors, running from online platforms, with minimal overheads. They’re outstripping banks in key areas: speed, cost, simplicity and added value. 

Loans from £10,000 to £2m (and this is increasing all the time) are available to profitable SMEs within a couple of weeks (often faster) at very competitive rates (7-19%). Crucially, there is no sting in the tail, with no early repayment charges (or complicated interest rate swap add-ons) and the added value comes when businesses borrow from a crowd of interested stakeholders. They’re motivated to see the business succeed so they get their capital and interest repaid.

Leading players in this market are, Funding Circle and will be on stand 64 at the Elite Business Event. To find out more about a business loan, contact Rick Hyland [email protected] or 07904915818.