Alternative finance is any type of business finance that doesn’t come from a mainstream provider like a high street bank. Mainstream finance is great for many businesses but the banks often have criteria which smaller businesses can’t meet and they need other options.
Below are options available to Leeds businesses.
1. Coronavirus Business Interruption Loan Scheme
Lots of alternative lenders, as well as mainstream banks, are accredited Coronavirus Business Interruption Loan Scheme (CBILS) lenders. CBILS loans come in the form of term loans, overdrafts, invoice finance and asset finance.
The deadline to apply is 31 March 2021, so if you’re experiencing cash flow problems or disruption to trade due to the coronavirus pandemic, there’s still time. You could be eligible for up to £5 million, depending on your circumstances.
If you’ve already received finance due to coronavirus disruption, you might be eligible for a second CBILS loan. The Government makes a Business Interruption Payment to cover the first 12 months of interest payments, so you won’t pay interest for the first 12 months.
2. Unsecured Business Loan
Unlike secured business loans, you won’t be required to provide any of your business assets as security when you take out an unsecured loan.
Depending on the lender, you may have to put forward a personal guarantee, but this isn’t always the case. The lender will look closely at your business’ trading position when making a decision, as well as its credit history.
It’s important to bear in mind that because unsecured lending is riskier to the lender, the interest rates can be higher. How much you pay will depend to some extent on your credit rating and the quality of your end of year accounts.
3. Merchant Cash Advance
A merchant cash advance is a type of business funding that is designed to help businesses gain access to the cash they need in a flexible way. The lender provides the business with a sum of money which it pays back through a percentage of its customers’ card payments.
Merchant cash advances can be suitable for a wide range of businesses. This type of finance can also be easier to access than other more traditional forms. A merchant cash advance can also be a useful funding solution for businesses with no or few assets, as well as those who require capital for growth but have a limited credit history.
Merchant cash advances are one of the most innovative products in alternative business finance. The concept has only existed for a few years, but it’s already proving very popular with retail businesses and the leisure sector.
Put simply, a merchant cash advance uses your card terminal to ‘secure’ lending — perfect for businesses without many assets, but who have a good volume of card transactions every month. Repayments are then taken as a proportion of your revenue, making it a quick and easy funding solution for many SMEs.
4. Invoice Finance
Invoice finance is a way of borrowing money based on what your customers owe to your business. Unpaid invoices represent money that will be paid to you, but you have to wait for the payment terms to elapse, which could be anything from 14 days to 90 days or more. Invoice finance gets you most of the cash immediately, so you don’t have to wait to get paid.
The concept is simple — rather than waiting days or weeks for your invoices to be paid by customers, lenders advance you most of the value immediately. That means you get paid faster for completed work, so you can focus on running your business.
5. Business Credit Card
As with a personal credit card, a business credit card provides your company with access to a revolving line of credit based on your needs and circumstances. It can be used to help you manage cash flow and separate your business and personal spending.
Some business credit cards incur an annual fee and as with personal credit cards, you’ll have to pay interest on your balance if you don’t repay what you owe in full each month.
Depending on which card you opt for, you can also benefit from cashback, rewards and other perks such as free travel insurance and 0% interest on purchases for a set time.
For the best results we recommend sourcing a locally based service provider for the best results.
If you plan to buy a product or service for your business in the next 12 months please complete the form below.