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Business Agent

Business Finance: Beyond the Business Loan

16 June 2016 14:15


For many, the traditional business loan is the most logical option when looking for finance. However, sometimes it just doesn't work out how you want it to. You can’t get the finance you need and you have been turned down for your loan. This is where the road ends for most but it doesn’t have to be. With peer to peer lenders on an all-time high and new innovative companies entering the market every month, you might be able to raise the finance after all. I’m going to discuss a few different options that offer you an alternative to a traditional loan.

Invoice finance
Also known as invoice discounting and Invoice factoring. This is where you come to an agreement with a third party provider who will buy your unpaid invoices and then deal with your customers direct to collect payment. Most providers such as MarketInvoice or Ultimate Finance offer an online platform in which you can upload your unpaid invoices and can except payments within 48 hours. The benefits this can give to your business is that you don’t need to look for a traditional loan to raise your cashflow, you can simply work on an going basis with providers to offer a quicker payment on your invoices for a small cost on top. This is an ideal option for anyone looking to keep cashflow high in order to meet on-going orders.

Asset Finance
Asset finance is where businesses use a provider to supply them with equipment needed in order for their business to grow. It’s a rather simple method if you are in need of kitting out your firm or in need of machinery. Companies like LDF will help you through the whole process, sometimes even helping you find a supplier of the goods. Once it’s all signed off you receive the assets and make payments back on them. It’s a good technique because you will be assessed on whether or not you can afford the equipment, you can look for a good deal so you don’t end up borrowing too much, and the finance is secured against the assets.

Business Cash Advances
The reason I have mentioned business cash advances is because there are some lenders that have been taking a different approach. Companies like Liberis offer a cash advance based on your actual sales, so you never borrow too much and get in a worry. You also pay back as you earn which is a good factor. If you have a slower month you pay back less and on a higher month you pay back more. This is all done through your actual card transactions. This is a safe option for businesses because you don’t have the worry of monthly payments which you can’t afford when you have a quiet period.

Peer to Peer Loans
Peer to peer works in the same way as a business loan; it’s more about where the money comes from. Rather than borrowing directly you borrow from ‘the crowd’ who invest money into your business and you pay them back. The benefits with this is that you tend to get your application looked at manually on a case by case basis as opposed to a computer telling you no. peer to peer companies offer competitive rates and you can end up walking away with a great deal. It’s a good alternative to the bank if you can’t seem to get a loan and plenty companies such as Boost offer short term loans that can work as an overdraft facility. The more your business grows and the quicker you pay back, the more finance you can be opened up to.

Equity Crowdfunding
This is a much longer process and can involve a lot more work. Equity crowdfunding is selling shares into your company to ‘the crowd’ in exchange for capital. This process tends to have a much bigger build up and lots of preparation. Creating a presence and a following, you need to get a buzz going for your business. If it’s a slick idea that’s a fresh product, your chances are much higher to get funded. Remember that people buy into what they believe in, if you are offering an amazing product/service, let everyone know! work with all the best equity crowdfunding sites and can help you along the way to getting funded.

So if you are finding yourself stuck, remember that there is a whole world of alternative finance out there that can help you get on the right track. It’s important to look at why you need the money and you can end up finding yourself falling into a category that lenders specialise in!

Lee Nicolaou

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