Alternative Funding for 2021

This month we expect to see the end of the CBILS and Bounce Back Loan Schemes. If this happens, the landscape for business lending will change dramatically.

Lenders will be looking at the amount that borrowing businesses have taken on and this will affect future affordability.

Businesses who may have previously borrowed money using a traditional unsecured loan may find themselves unable to borrow further and may need to look at alternative ways to raise finance- some of which may be cheaper!

Here we look at some of the alternative way businesses can finance growth or improve their cash-flow:

Asset Finance:

This can be used for spreading the cost of purchasing equipment over a fixed term meaning your business doesn’t need to shell out a large upfront cost. It can help ease your business cash-flow massively.

Asset Finance is split into two categories – Hard and Soft.

Hard assets are usually wheel-based such as cars, vans, tractors, LVS, and construction site vehicles as well as large pieces of machinery for manufacturing, printing, or agricultural use.

We recently arranged the finance on a large blast freezer that allowed a pie maker to grow their business through asset finance.

Soft assets examples are LED lighting, solar panels, software, IT Hardware, shop fit-outs, commercial kitchens, air conditioning units.

We work with suppliers to give their customers an asset finance option for soft assets such as the ones mentioned above. 

Asset Re-finance – If you have some hard assets that the business owns on the books then re-financing is an excellent way to help with cash-flow, a lender will value the asset and lend you the cash value as a loan secured n the asset. The business then makes monthly repayments over a set term. Once it is repaid, the business then owns the asset again.

Invoice Finance:

Cash is king and your sales ledger is an asset that can be used to help keep the cash flowing within your business.

Invoice finance, also known as factoring or discounting, is where a funder will agree to pay you a cash amount for a percentage of your invoices raised to other businesses.

The percentage they fund depends on the industry your company trades in but can be as high as 95%.

When your customer pays the invoice the funders will pay you the remainder of the invoice minus a small fee.

We have funders who can fund a sole trader for an invoice of £500 all the way up to PLCs and hundreds of thousands.

If your business provides a product or a service to another business you are suitable for an invoice finance facility.

We have recently arranged a £350,000 invoice finance facility for an expanding recruitment business who had taken on new clients.

Stock Finance:

This is an ideal option for retailers or businesses that rely on purchasing stock upfront to complete a project before being paid.

It works as a revolving facility where you pay interest on how much you have used each month, when you sell your products or get paid for a project the money borrowed goes back into the facility until you need to use it again.

As it’s interest-only it’s much cheaper than a term loan so helps the business grow whilst keeping costs down.

For this facility, you would need to be a homeowner.

We recently helped an LED lighting provider with a stock finance facility, this allows the business to purchase equipment upfront to complete ongoing projects before the customer pays.

Property-Based Lending:

This is ideal for customers who need a quick injection of cash. It could be through a 1st or 2ndcharge mortgage with a set repayment over a fixed term or a short-term bridging loan. The funder lends a percentage of the property value over 12 months, the client will then pay a monthly interest rate with the balance due by the agreed date.

Where a property or land is involved a lender will provide quick access to cash.

In summary, whilst traditional lending may take a hit as we move out of the pandemic, there is still a multitude of options that can help business owners grow their business and get back to pre-pandemic prosperity.

real5 Finance works with a panel of lenders with a vast array of options which allows us to create bespoke funding solutions for your business.

A chat with us will cost you nothing! We can provide guidance and access to all the funding options mentioned above, get in touch on:

Or call 01925 918970