Speak to any business owner or browse the business section of any newspaper and most likely likely to come across stories of struggles to access sufficient finance to grow or maintain their business. But we are beginning to witness a big change in how business owners access finance with many now looking for away alternative sources. military travel loan company
A study carried out by the UK’s Forum of Individual Business found that 26% of businesses were hunting out alternative lending options, with 21% seeking them outside of the traditional main High-street lenders. In fact, in another review undertaken by the Federation of Small Businesses, it was uncovered that only 35% of respondents used a traditional overdraft service in 2011.
So, if banks are continually hesitant to lend to all but the cheapest risk businesses, how can the remaining of the UK’s business populace finance growth? Below are a few of the increasingly popular substitute sources of finance to investigate.
Better Management of Working Capital
This might look to be an peculiar source of finance but very often businesses are sitting on undiscovered cash reserves which is often used to finance growth. A survey issued by Deloitte in 2011 revealed that the UK’s major businesses were sitting on? 60 million of unproductive working capital. Inefficiencies in how working capital (debtors, stock and creditors) is handled can unnecessarily tie up your money. Cash can be unlocked and released back again in to the system thereby allowing self-financed development plans by taking a detailed look at credit techniques, how credit conditions are approved and exactly how outstanding payments are chased.
Ensuring that stock is kept at an optimum level via better inventory management is yet another area where cash can be released to support and finance development. Take a good look at your inventory management process and identify areas where cash is captured.
Good management of working capital is not simply about better control of borrowers and stock, it is also about maximising the conditions given by collectors. Are you too excited to maintain a first class relationship with your suppliers by paying prior to the due date? You can positively impact your cash position through full good thing about conditions proposed by your suppliers. Have you completely leveraged your position by seeking an comprehensive of conditions from say 35 days to 45 times?
Being better in how working capital is been able can release sufficient cash to self-finance growth ideas.
With traditional avenues of funding being more difficult to gain access to business owners are actually looking to their personal resources to fund growth. If it be using cash savings, using personal credit cards or taking additional mortgages on residential properties, such sources are an instant solution. A review by the Federation of Small Businesses found that 33% of respondents experienced utilised their savings to fund growth. As well as being more immediately accessible using personal resources is often a less costly source of finance.
Friends and family and Friends
Sometimes known to as the 3 F’s – family, friends and fools – this can appear to be a less stressful way of raising finance. In some ways it can but it can be a journey fraught with threat. Tapping into their personal network business owners source finance by either seeking that loan and offering to pay an interest rate higher than that offered on a High Streets savings account, or offering a slice of value in the business in return for investment.
Setting up finance in this way can be relatively easy because the request and fulfilment is certainly much based on personal trust. Typically a Business Approach would be presented showcasing both the investment opportunity and the risks but at the end of the day success is into the depth of the partnership and level of trust.
The risk in raising funds this way is that the nature of the marriage will change from that of the personal nature to a small business transaction. Failure to regularly pay as every agreed terms, or even total failure to pay, can irreparably damage the relationship so tread with care.
The Asset Finance industry is founded on the concept of either preserving cash or boosting up access to it. Asset finance, which contains invoice discounting, factoring and funding of asset buys, has been available as a source of fund for quite some time, yet it’s only now gaining more acknowledgement. Figures released by the Asset Based Finance Connection, a trade association symbolizing the industry, show that to another quarter of 2011 the total amount financed by the Association’s members increased by 9% compared to the same period in the last year. Whilst the increase might not exactly seem to be significant it is against the foundation of an along with traditional bank lending.