Small Business Financing | The 11 Best Options Compared

04-April-2024
04-April-2024 13:56
in Commercial
by Sam Hodgson
Small Business Financing

Understanding the options available for small business financing is essential to make sure you obtain financial products that help your company, rather than those that put it under additional unwanted pressure. 

Keeping the money flowing is a constant pressure for small business directors and owners. Thankfully, there is an impressive range of financial products designed with the small business in mind - but how do you know which is best suited for your need?

If you need to speak to an advisor for advice on the best option for your business, you can book a free consultation with one of our experts below.

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Small Business Financing

Contents

What is Small Business Financing?
Getting Your Small Business Off the Ground
11 Small Business Finance Options
Small Business Finance Case Studies
Obtaining Small Business Financing 

What is Small Business Financing?

A small business is one that has less than 50 employees and, in the UK, that’s the vast majority of privately owned businesses.

Small business financing is simply a type of business loan that's tailored to small businesses.

In fact, over 95% of private companies in Britain are considered a small business - so if that includes you, you’re definitely not alone!

Banks and financial institutions are fully aware of the range of needs that small businesses have and position their products to cater for these needs, meaning there’s doubtless a small business finance product that fits your particular situation.

This wealth of experience and customised support makes small business financing a powerful tool in the hands of smart business owners across the UK. 

Getting Your Small Business Off the Ground

Small business financing starts at the very beginning of your company’s journey. With a range of startup products available for businesses in the very early stages - from concept through to the first three years of trading - there’s a finance option that’s there to help you make your entrepreneurial dream a reality.

If you are looking to start a new company and have an exciting business idea germinating in your mind, then small business financing and startup finance are exactly what you need.

Small Business Financing

11 Small Business Finance Options

Over the decades, lenders have developed a range of key products designed to best serve small businesses. Today, financial support for companies is extensive and covers every stage of your business journey.

Small Business Financing for Growth

Many businesses first turn to small business financing because they are looking to grow. This is true of startup businesses, who are literally growing from nothing to become a legitimate venture, and for established companies eager to continue expansion.

In business, you are always moving - so if you’re not growing, you’re shrinking! Small business financing makes sure that your movement is always in the right direction.

Products that are especially suited for growth include:

1. Unsecured loans - An unsecured business loan can provide an injection of capital right where it’s needed and, with a range of loan sizes available, are suitable for all, from single-person sole trader companies through to businesses needing £5 million or more for a major expansion.

2. Asset-based (secured) loans - Moving a little up the range, asset-based loans provide businesses with a way to obtain larger sums, utilising existing assets as collateral to guarantee the loan. Asset-based loans include commercial mortgages, giving your company a way to obtain its own premises for long-term investment and security. With lower interest rates and larger available loan sizes, asset-based loans are perfect for companies looking to the future.

3. Asset finance - Often, you are looking for money to purchase a specific piece of equipment or machinery. It could be a company car, the latest technology required to undertake a new project, or plant machinery essential for ongoing work; in all cases, asset finance provides an alternative to large scale investment. Through asset finance, you can spread the cost of an acquisition or even choose to effectively rent it in the short-term; the flexibility and range of options means there’s an asset finance solution for almost every need.

4. Business bridging loans - One thing that helps a business expand is having the capital available to take advantage of opportunities that come its way. This may be because a competitor has entered liquidation and their assets are up for sale at a cut price, or a building is available at auction that would make a perfect new office; a business bridging loan enables you to make the snap decision to take advantage of such an unexpected situation even if the business doesn’t have the capital on hand.

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Small Business Financing for Reliability

Running the day-to-day operations of a business takes cash and, specifically, strong business cash flow. Dealing with cash flow is one of the problems many small businesses face, making sure the money is coming in before it is needed to go out.

With a range of products designed to help with cash flow, lenders can offer companies the breathing space needed. Consider the following:

5. Invoice finance - Developed for B2B companies whose income comes from invoicing clients and waiting 30 days (and sometimes longer) for payment, invoice finance offers a way to release those funds early. If cash flow is tight and bills need to be paid, unlocking the money tied up in your accounts receivable can make all the difference.

6. Merchant cash advance - Similar to invoice finance in many ways, merchant cash advance offers a way to borrow now based on the expected card transaction earnings of the future. It is especially helpful for businesses such as shops or hotels who have seasonal ebbs and flows, providing them with a way to smooth out the year’s cash flow.

7. Revolving credit facilities - Revolving credit provides businesses with a backup level of credit that they can dip into when needed, and repay when convenient. A well-used method of smoothing cash flow, a revolving credit facility ensures that you can meet your responsibilities even if the business has been caught a little short.

8. Tax loans - Ensuring you are up to date with your tax obligations is a concern for many small businesses. Customised loans to pay your corporation tax or VAT bill can help you spread the cost of tax liabilities out over a year (or sometimes longer), easing your cash flow without affecting your relationship with HMRC.

Small Business Financing

Small Business Financing for Support

Sometimes your business can run into trouble. Things begin to spiral; your business credit score tumbles and you find yourself seriously considering liquidation and even personal bankruptcy.

Don’t panic! There is a range of small business financing developed to support your business through rocky periods, preventing you from going under by providing that investment exactly when you need it.

Options for small businesses in difficult times include:

9. Bad credit loans - Though you may suffer larger interest rates and more inflexible repayment terms, many lenders are willing to consider you for a helpful loan that will dig your company out of the hole.

10. Consolidation business loans - One of the problems with credit problems is the spread of payments to different lenders, each with their own terms, payment dates, interest rates, and pressure. A consolidation loan ties all these into one single repayment schedule, easing the administrative difficulties and making it all far more manageable, as well as potentially saving £££s in interest.

11. Fast application loans - Sometimes the help you need is incredibly short time, just meeting payments for the end of the month until money comes in. In these cases, getting a loan approved as quickly as possible is essential. Quick business loans can be turned around in 24 hours, and sometimes even less, taking the pressure off instantly.

The Value of Advice - Small business financing isn’t all about providing money. Sometimes what you need is some solid advice and planning to get you back on track. At Clifton Private Finance, our team of advisors are always here to help you smooth out any issues.

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Small Business Finance Case Studies

Explore some of our recent case studies below of how we've helped small businesses get access to finance, with bespoke solutions based on their cash flow and existing business assets.

Large Invoice Finance Facility Secured Despite Overseas Debtors
Large Invoice Finance Facility Secured Despite Overseas Debtors
Area
London
Capital Raised
£2.5m
Fleet of Vans Refinanced to Release £160k for Business Growth
Fleet of Vans Refinanced to Release £160k for Business Growth
Area
Cardiff
Capital Raised
£160k
Fast Asset Finance for Two Tractors at Low Rate | Case Study
Fast Asset Finance for Two Tractors at Low Rate
Area
Somerset
Capital Raised
£558k
Management Buy Out Finance For Funeral Director
£750k Management Buy Out Finance For Funeral Director
Area
London
Capital Raised
£750k
Asset Based Lending Facility for Steel Business | Case Study
Asset Based Lending Facility for Steel Business Management Buyout
Area
Wales
Capital Raised
£1.3m
Anaerobic Digester Plant Refinance For Business Growth
£5.2m Anaerobic Digester Plant Refinance For Business Growth
Area
Wales
Capital Raised
£4.1m
 

Obtaining Small Business Financing

Understanding that there’s a wide range of small business financing available is only the first step on the road to obtaining that cash! How do you actually get small business finance? Well, it’s a two stage process:

1

Stage 1 - Preparing for Small Business Financing

Preparation is key! (We’re not the first people to ever say that.)

Successfully getting finance is all about limiting the risk to lenders and the best way to do that is to present you and your business in a strong light.

  • The business credit rating - Your credit history is the first piece of information any lender is going to look at. A score that’s based on your past financial dealings (particularly the previous three months), your credit rating is one of the most important parts of small business financing. Prior to applying for any loan or other finance, we recommend spending time analysing and improving your credit score.
  • The business plan - If you really believe in your business (and we know you do), then there’s no doubt in your mind that it can take on any small business financing responsibly and pay it back. So show the lenders that! Your business plan is where you get to lay out what your business is, who you are, and just why it will be successful in the years to come. Take the time to get your business plan right.
  • Financial forecasts - Sometimes developed as part of the business plan, but often an independent set of documents, your financial forecasts will show any potential lender that you have the income needed to cover the loan repayments and, at the end of the day, that’s all they really want to know.
  • Current financials - Documenting your current financial situation is vital. Expect to be asked for the last three months of bank documents, plus your current accounts.

Small Business Financing

2

Stage 2 - Applying for Small Business Financing

There are three real ways to get small business financing and, for obvious reasons, we suggest the third:

  • Go to your current bank - It’s quick, it’s easy, and you already have a relationship with them. Your current bank will be more than happy to talk to you about any loans or other financing you might like. However, chances are that you won’t get the best rates here, and if the product you want is somewhat niche, maybe it’s not something they offer. What you get in terms of ease, you definitely lose in terms of range.
  • Research all the options yourself - You might have the weeks it takes to scour the internet and compare the possible finance options against each other until you reach a confident conclusion and, if you do, that’s great! Just don’t jump on the first offer you see as it’s unlikely to serve you as well as many of the alternatives, and make sure you read all the terms and conditions before you sign.
  • Use Clifton Private Finance - We told you that we liked the third option the best. As a small business financing broker, we’re perfectly positioned to find the finance product that perfectly meets your requirements. Decades of experience and access to the full market means that we know just who to consider; including lenders who won’t speak directly to public enquiries. Not only that, we’re here to help with expert advice and answers to any of your finance questions.

Give us at Clifton Private Finance a call today and access the perfect small business financing for your company.

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