By Richard Morley, Director of European Development, http://liquidfinance.co.uk" target="_blank" rel="nofollow">Liquid Finance Partners Limited (“LFPL”)
Acquiring finance in the current economic climate can be a daunting task with seemingly few options available to small and medium sized businesses looking to build or expand. The first and most obvious option is to contact your bank and discuss the lending options that are available to you. This should be the first port of call for a small business seeking finance. However, unsecured bank lending to small businesses is currently very low, so don’t be surprised if your loan isn’t approved straight away or even rejected outright. This need not spell the end of your business expansion plans, renovations etc.
Between a rock and a hard place? No – there is finance out there.
When the option of a bank loan is no longer available or the amount they are willing to lend is not enough, where can you turn? The good news is that over the last seven or so years a number of new financial providers have come into the market: Challenger Banks, peer to peer lenders, crowd funding, specialist invoice discounters and the like. These so-called alternative lenders are keen to help well-run businesses and you should be speaking to them.
A further option is to apply for an unsecured cash advance from another alternative lending source: the Merchant Cash Advance providers of which LFPL is a leading provider in this sector. Ideally, this type of financing is best if you are looking to quickly secure short-term unsecured finance for something that is expected to boost the strength of your business such as refurbishment, expansion, the purchase of additional stock or advertising. In simple terms you can raise finance against your future credit and debit card receipts. Turnover £20,000 pcm on credit and debit cards? If so you qualify for a £20,000 cash advance.
Taking out a cash advance can seem like an expensive option at first glance; however there are no fees, legal fees or valuation costs to consider, and with strong approval rates for well-run small businesses it becomes a competitive and compelling product. Repayment of the cash advance is against a daily percentage of the businesses card takings so when takings are down you pay less and vice versa. In other words the repayment cycle follows your cash flow.
What to look for
Looking for finance can be daunting so don’t hesitate to ask for help and advice. Your bank may not be able to help with your particular requirement but don’t be shy to ask what the bank’s recommendations may be and if they can give you an introduction. Brokers specialising in small business finance are a very good source of assistance. Phone a friend. Speak to a friend, a fellow business owner and ask them what they think – where did they get the money for the extension to the restaurant etc…Your suppliers will also be a good source of knowledge in regard to finance options.
Common sense dictates that you need to be comfortable with whomsoever you are dealing so for instance make sure your broker is an established company and ideally a member of the NACFB. Likewise check your lending source is either regulated (probably most typically by the FCA), or affiliated to a regulated entity. Some types of finance are not regulated per se which should not deter you but check the company is well known and has a good reputation.
As far as is possible try and compare at least two sources of finance, their rates, fee structures and generally try and gauge with whom you would like to work.
A final word: when approaching a new lender make sure you are absolutely clear as to why you want the money and how you are going to pay it back. And don’t, please, leave raising finance to the last minute. Plan ahead. Plan ahead. Plan ahead.