• startups
  • June 22, 2015

How Can I Finance My Start-Up?

By Lawbite Team

Book a call
article

It’s no secret that access to mainstream credit and lending facilities has dried up significantly since the onset of the Financial Crisis in 2007. Almost overnight, risk-averse banks started taking a one-size-fits-all approach that simply doesn’t work for many small businesses, especially when their situation is urgent, complex, or challenging. Even worse, many small businesses simply give up if mainstream lenders reject their application for finance. And this is where the broad category of ‘alternative finance’ comes in.

 

An accessible alternative?

The accessibility of alternative finance depends on the individual circumstances of the business: like banks, lenders require specific details to ensure the SME is suitable. However, there’s such an array of alternative lenders – with more and more providers cropping up all the time – that it’s easier than ever to find the perfect fit for your business, whatever position or industry you’re in. Here are three examples of alternative finance that demonstrate the variety of options available:

 

1. Merchant cash advance

If your customers pay you via card terminals, you’re already eligible to apply. Lenders will advance you a cash sum based on card sales, generally up to a month’s revenue, allowing you to pay it back as a percentage of future turnover or a pre-agreed fixed sum. It’s quick, straightforward, and often a good fit for retailers with a high number of low-value transactions.

 

2. Individual invoice finance

Invoice finance is another example of an innovative finance solution for SMEs, and it’s a great way to raise cash if you have large outstanding invoices, big projects, or established clients. By showing invoices to your lender, they can immediately raise most of the invoice’s value, to be paid back on receipt of payment from your client. Because the lender is effectively placing trust in your customer to pay the invoice, it helps to have creditworthy blue chip clients – and if the arrangement is agreed, it can be a great way to avoid cashflow pitfalls.

 

3. Crowdfunding

Also known as peer-to-peer (P2P), online platforms connect businesses seeking finance with a number of individual investors. Generally this involves either investors taking a small percentage of equity in the company, or lenders loaning money and earning interest on repayments – but either way, it can be a mutually beneficial agreement that is much simpler and easier to secure than the traditional route via your bank.

 

Final thoughts

It’s clear that the alternative finance market for small businesses is more diverse than ever – but this also means it’s even more important to understand your own needs and match them to the product and lender that fits best. Overall, the availability of finance depends on individual circumstances, both of lender and borrower, and platforms like Funding Options are available to help you find the best product quickly. Finally, a new law passed by the UK government will require banks to refer businesses they reject for finance to alternative lenders - leaving small businesses looking to grow in a much, much better position.

 

Conrad Ford, founder and CEO, Funding Options

 

Funding Options is an industry-leading online platform that scans the market to connect small businesses with alternative lenders. Through a combination of leading technology and highly rated customer service, we have already helped hundreds of businesses raise hundreds of millions of pounds of finance. And as a startup ourselves, we understand the challenges that small businesses face – so our service is fast, no-obligation and completely free.

For more information visit FundingOptions.com

 

In closing

Nothing in this article constitutes legal advice on which you should rely. The article is provided for general information purposes only. Professional legal advice should always be sought before taking any action relating to or relying on the content of this article. Our Platform Terms of Use apply to this article.

Related Articles

Read our latest blog posts on GDPR, featuring all the latest legal news, analysis and opinion from our expert lawyers.

blog image
  • By Lawbite Team
  • April 27, 2020
COVID-19 - UK Government Support to Help SMEs

This is certainly a unique time that business owners are facing throughout the UK, and the rest of the world. The Chancellor of the UK Government, ...


Funding, In The News, Finance, Coronavirus
  • By Lawbite Team
  • April 22, 2020
FAQs - Coronavirus Business Interruption Loan

The British government announced on 16 April 2020 that it will extend the Coronavirus lockdown for at least another three weeks. This will come as ...


Finance, Coronavirus
blog image
  • By Lawbite Team
  • January 27, 2020
Ensuring your business meets customer demand

The most common concerns that are heard from business owners are generally; improving their product or service, driving traffic to their business a...


Startups

LawBite can help you

LawBite is on a mission to provide business legal advice that is easier to access, clearer to understand and much cheaper. Our on-line legal advice platform can quickly connect you with expert business legal advice. Our friendly, highly qualified business lawyers, solicitors and mediators will give you the guidance and reassurance that comes from customised legal advice for small and medium sized business.

Whether you are bringing or defending a legal claim, outsourcing work, want a business contract review to ward off disagreements, talk to an expert trademark lawyer, resolve a contractual dispute with methods like mediation and arbitration, or getting your new company set up and on the right footing with a robust shareholder agreement and GDPR standards, we can help you succeed.

defend a claim

Talk To A Lawyer

Book A Call
defend a claim

Learn more about LawBite