According to research by the University of Surrey, 58% of small and medium-sized enterprises use just one source of business finance. It’s a surprising statistic, given that many banks are currently reluctant to lend to small businesses. It’s even more surprising when one considers the rapid growth of the alternative finance market – and in turn, the many businesses it has helped to grow.
550% growth in Alternative Finance in two years
Last year the innovation charity Nesta joined forces with the University of Cambridge to discover the facts about the alternative finance industry in the UK. The results are an eye-opener, to say the least. The study showed Britain’s alternative finance market has grown from £267 million to £1.74 billion in just two years and could reach £4.4 billion in 2015. It also showed that 86% of business owners who have used alternative finance would approach alternative funders first in future, even if offered similar terms by a bank.
Common reasons given for using alternative finance were greater control, faster access to funds, ease of use, better customer service or simply a need for rapid working capital. However, the most interesting part of the study was the success of the companies involved.
A staggering 75% of businesses raising capital through crowdfunding launched a new product or service as a result. Seven out of ten SMEs borrowing via peer-to-peer business lending saw their turnover grow and almost two-thirds reported an increase in profit. So what other options are on the table when you need finance and banks aren’t ideally placed to provide it?
Alternative finance: the options
Emergency business loans are a good way to get fast finance and deal with a troublesome cash flow. At Cashsolv, we fund emergency loans ourselves, meaning we can have the money (from £20,000 to £250,000) in your account in under 24 hours.
Alternatively, asset finance offers an excellent longer-term alternative, where you borrow against the value of your premises or equipment. For this type of loan, we use a panel of lenders, allowing us to match the lender to the client which offers the keenest interest rates and most attractive terms of business.
Introducing invoice factoring and discounting
However, many SMEs prefer the ultimate flexibility offered by invoice finance. Targeted purely at business-to-business companies, this form of finance can allow borrowing of up to 85% of the value of outstanding invoices, with payment made as soon as the invoices are raised.
With factoring, the lender takes ownership of your debtor ledger and its credit control team liaise with your clients to ensure payment. With invoice discounting, you retain control of your ledger, meaning that your clients do not find themselves dealing with a third party. This has both advantages and disadvantages: you will pay lower fees but may find that your own team are not as adept as our own tactful but persuasive debt collection professionals in securing early payment.
Whichever form of alternative finance suits your needs, Cashsolv is on hand to help. As the statistics show, smart businesses are using alternative finance to power their growth – and are giving themselves the edge. To see how you can do the same, please visit our business finance page.
For further information Download our Guidance Paper on 'How short term business loans can help your business finance problems', or view the following relevant pages:
- Business loans
- A guide to Short term business loans
- Emergency business loans
- Emergency business loan - why not use a bank
- A guide to Small Business Loans
- How quick business loans can encourage business turnaround
- How to get a quick business loan
- The pros and cons of secured business loans
- How to make business finance work for you
- A case study: How we helped a recruitment firm invest for growth
- A case study: Quick business loans could be the answer
- Business loan calculator
- Construction Finance