Author: Smarter Loans

There are 5.5 million private businesses in Britain, but while the focus of much of the UK financial market is in the capital, there are plenty of opportunities for those based in other metropolitan centres – including those seeking business financing. Here are the best business loan options up and down the country as of right now:

Traditional Business Loans

The majority of businesses still turn to traditional business loans from high street lenders for their external financing needs. The average amount borrowed is £25,000, but loans of both more and less than this are available, on both a secured and an unsecured basis. Current business loan interest rates average 6-12%, depending on lender and borrower. These interest rates are among the most competitive on the market, and are accessible to businesses in every part of the country – not just to those in urban areas. 

The downside of traditional business loans is that they are hard to qualify for; while geography is not a barrier to access, their strict eligibility criteria are. Typically, these criteria state that a business needs to have: an operational history of at least two years; a good credit score; reliable, adequate cash flow; a business plan; and extensive financial documents to substantiate the business’s financial circumstances.

Alternative Financing Options

For businesses not meeting the requirements of traditional business loans, there are alternative options from specialty and challenger financial companies; these are again available throughout the country. These options include instruments like business lines of credit, merchant cash advances, invoice factoring loans, and equipment loans. Most specialty and challenger lenders have online platforms – indeed many are digital-only entities – and they tend to have more flexible eligibility and repayment criteria than traditional business loans. They also offer much faster processing times, so are a good option for those in a hurry. 

UK Government/Non-Profit Programs

Not every business wants to borrow from a commercial lender though, and fortunately, they don’t necessarily have to. The UK government offers a range of loans and grants aimed at helping small and medium sized businesses, and it assists private development and investment funds to do the same. You can find a full list of the over 120 schemes currently available across the UK here, but here are the major ones to be aware of:

London/UK-Wide Programs

• Start Up Loan: provides government-backed loans of up to £25,000 to companies that have been trading for less than three years, charging a fixed interest rate of 6%
• Growth Guarantee Scheme: provides partially government-backed access to a range of financing products, such as term loans, invoice factoring loans, and so on
• Funding Circle: provides peer-to-peer loans of up to £350,000 (unsecured) and £1 million (secured) to SMEs with at least two years of trading history

Northern England/Yorkshire Programs

• Business Enterprise Fund: provides non-profit loans of up to £250,000 to businesses of all ages with less than 250 employees, based in the NE
• GC Business Finance: provides loans of up to £300,000 to SMEs in Manchester and the NW that have been unable to secure financing elsewhere
• Investment Fund – North of England: provides government-funded loans of £25,000 to £2 million to SMEs based in the North of England
• Key Fund: provides grants and loans from £5,000 to £300,000 to small and new businesses with a social purpose, based in the Midlands or the North of England 
• North of Tyne Growth Fund: provides grant funding of £20,000 to £200,000 to businesses based in the NE that are looking to grow and increase employee numbers
• Rosebud Finance: provides microfinance of up to £100,000 for businesses in Lancashire 
• SME Energy Efficiency Scheme: provides grants to businesses based in Tees Valley that are seeking to improve their energy efficiency

Eastern England/Midlands Programs

• First Enterprise Loans: provides loans up to £250,000 to businesses in the East and SE Midlands that are looking to grow
• Invest To Grow: provides loans and grants of between £15,000 and £250,000 to SMEs in the East Midlands that are looking to innovate, grow and create jobs
• Resilience and Innovation Grant: provides 50% match-funded grants (up to £50,000) for SMEs in the SE Midlands that need to increase their resilience to business challenges and invest in growth
• ART Business Loans: provides loans of up to £150,000 for small businesses in the West Midlands that are unable to get funding from a bank    

Southern England Programs

• Business Growth Loans: provides loans of up to £100,000 to profitable SMEs in the South that have been trading for at least 12 months and that cannot secure funding elsewhere
• BCRS Business Loans: provides loans of up to £150,000 to SMEs in the SW and West Midlands that are unable to get a bank loan, for the purposes of development and growth

Scottish Programs 

• Scottish Growth Scheme: provides government-funded debt finance of up to £250,000 and equity finance of up to £2 million to Scottish SMEs wanting to invest in growth
• Scottish Venture Capital Fund: provides £100,000 to £2 million to high-growth, early-stage businesses in Scotland that are looking for equity investors
• Business Energy Scotland SME Loan Scheme: provides loans of up to £100,000 to Scottish SMEs, for energy saving upgrades 

Welsh/Irish Programs

• Business Development Bank of Wales: over 1100 programs on offer, delineated by business location, age and size
• Enterprise Ireland: provides grants and loans from multiple sources for Irish businesses of all ages and sizes

Rural Programs

• Gigabit Broadband Voucher Scheme: provides up to £3,500 to rural SMEs wanting to upgrade their business broadband

As is clear from the above, there is plenty of choice for SMEs across the UK. If you’d like to learn more about your business’s options, or if you need access to flexible, affordable financing today, talk to Swiftfund. And find more helpful guidance on the world of business financing on our blog.

Adequate cash flow is essential to the smooth running of any business, but many struggle to maintain consistency in this area, for a variety of reasons. Fortunately, financial products exist that can help; but how can you best put them to use? Let’s take a look:

Why is Cash Flow So Important?

Cash flow – or the basic movement of money – is a fundamental aspect of any business. Without enough incoming cash, a business won’t be able to pay its bills and employees, purchase inventory, or maintain basic operations. Intermittent or unreliable cash flow can also endanger wider business objectives, such as growth, by impeding a business’s ability to invest. 

Unfortunately cash flow issues, even one-off ones, can pose a risk to a business’s very survival; delayed payments on bills can affect a business’s credit, which will make it harder and more expensive to secure financial help in the future; delayed payments to suppliers can negatively impact relationships and potentially limit access to inventory or resources; and delayed payments to employees may lead to talent loss. Moreover, interrupted operations will affect customer retention and business reputation, threatening market share. All of this is clearly very bad news for business owners, but not all threats to cash flow are avoidable.

What Can Threaten Cash Flow and Stability?

While it may seem obvious that a business needs enough money to cover its costs, it’s worth remembering that many everyday factors outside of a business owner’s control can impair cash flow; these include:

• Delayed customer payments or long-outstanding invoices
• Inconsistent sales (especially prevalent in seasonal businesses)
• Unexpected expenses, such as emergency repairs
• Fluctuating energy prices
• Changes in interest rates
• Unstable market conditions (for example, due to wider economic uncertainty)
• Supply chain delays
• Changing regulatory and tax landscape

So how can a business safeguard itself from these risks? 

Business Financing Options for Cash Flow and Stability

Appropriate business financing can help a business protect itself against all manner of cash flow threats, including those mentioned above. But not all types of financing will work for this purpose; for example, a traditional business loan, or anything structured like one, requires reliable cash flow to make set, regular loan repayments. So you need financing to compensate for unreliable cash flow, but you need reliable cash flow to pay for the financing!

For this reason, alternative forms of business financing are better suited to assist with cash flow; these include merchant cash advances, invoice factoring loans, and revolving credit facilities. All three allow for flexible borrowing that can adapt to your business’s changing needs. Merchant cash advances in particular suit businesses with inconsistent cash flow, as the advanced funds are repaid as a percentage of credit card sales; so if a business is in a period of low cash flow, repayments slow to match.

Ways to Use Business Financing to Improve Cash Flow and Stability

Making best use of business financing is an important corollary to finding the best business financing. There are a few ways funds can be best put to work:

1. Pay all bills and suppliers on time. This will not only prevent harm to your business, but will also build goodwill and a positive credit score for the future.
2. Negotiate better terms with your suppliers; for example, some offer discounts to those who pay their bills early. Using loan funds to pay for inventory and supplies, at a discount, and then recouping the money from future sales is a smart way to flip the standard cash flow script – if you have the funds on hand to do it.
3. Similarly, you can offer discounts to your customers for paying early, and use loan funds to make up the difference. This won’t work as a long-term strategy, but in the short-term it will help you to get out of a negative cash flow loop caused by inconsistent customer payments.
4. Invest in improvements to your payment, invoicing, inventory management, and delivery procedures to minimise inefficiencies and reduce unnecessary wastage. Such improvements need capital to affect, but once undertaken will permanently improve your cash flow.
5. Invest in a marketing campaign to attract more customers, and thereby increase your cash flow in the future.
6. Expand your products or services to diversify your revenue streams; this will help you reach more customers, potentially in new markets, and thus improve your cash flow, while protecting it from any single point of failure. 
7. Get expert advice to identify and mitigate potential cash flow risks, so you can be better protected in the future and avoid unexpected issues.
8. If you have customers (new or existing) that account for significant portions of your revenue, you might want to consider investing in customer credit checks. This can help you to identify potentially troublesome relationships before they hit your bottom line.
9. Invest the time and finances needed to thoroughly analyse and understand your current outgoings; a startling proportion of businesses can improve their cash flow simply by reducing unnecessary costs, but many lack the bandwidth to do so. Loan funds can provide the breathing room you need to reduce overheads on an ongoing basis.

If you’d like to learn more about merchant cash advances and how they can help your business weather difficult times, without stressing your credit or your budget, connect with Swiftfund. And find more invaluable advice for business owners on our blog.

Business owners have a lot of options when it comes to business financing, and there is one fundamental question they must answer before they can pursue any option: which is better for their business, debt or equity financing? These are two very different options, especially when it comes to scaling an existing business; so let’s look at them in depth:

What is Debt Financing?

Let’s start with the basics. Debt financing is the catch-all term for any form of financing that comes from an external source, and that must be repaid. Usually, this repayment is in the form of the original borrowed amount (the principal) plus interest, and the repayment term is set in the financing contract. The business owner does not relinquish any control of the business and retains 100% ownership.

Examples of Debt Financing

• Traditional business loans
• Online business loans
• Secured business loans
• Unsecured business loans
• Equipment loans
• Commercial mortgages
• Merchant cash advances
• Invoice factoring loans
• Business lines of credit
• Business credit cards
• Peer-to-peer loans
• Government loans

Pros of Debt Financing

• Retain full ownership and control of your business and all future profits
• Theoretically accessible to businesses of any size, in any industry, at any stage, for any purpose
• Can be accessed quickly and conveniently
• Interest payments on business debt are tax deductible
• Repayments are usually predictable and make budgeting simple

Cons of Debt Financing

• Loan funds must be repaid, plus interest and fees, regardless of business performance or cash flow
• Business credit is at risk if loan repayments are not made on time and in full, and credit score may be adversely impacted by the additional debt being carried by a business
• Business assets may be at risk if loan repayments are not made on a secured loan
• Borrowing amount is determined by business’s financial situation, the lender chosen, and the loan type

Best Uses of Debt Financing

Debt financing is best suited for predictable, stable expenditures, including many of those associated with business growth: equipment purchases, property costs, staffing costs, and so on. A stable cash flow is needed to ensure repayments are made, so it’s not a great solution if there is uncertainty about returns or a long timeline until profitability.

What is Equity Financing?

Equity financing is defined as any form of financing that is raised by offering shares, or a portion of ownership of a business, to one or more investors. No repayments are necessary, but business owners must be willing to give up some portion of the ownership of their business, share future business profits, and possibly also relinquish control over business decisions. However, in some cases (such as with angel investors), investors don’t just offer cash – they also offer industry expertise and guidance to help you grow your business.

Examples of Equity Financing

• Angel investors
• Venture capital
• Crowdfunding (if shares are offered in return for investment)
• Private equity

Pros of Equity Financing

• No repayments required
• Access to large sums of money
• Investment terms can be negotiated in detail
• Access to experienced individuals with a vested interest in the business’s success
• Can help boost business credibility
• Does not negatively impact business credit
• Provides avenues to financing for businesses not able to get more traditional forms of debt financing

Cons of Equity Financing

• Must relinquish full ownership and potentially control of the business
• Future profits must be shared
• Dividends paid to shareholders are not tax deductible (vs. interest payments on debt, which are)
• Can be difficult and time-consuming to find investors, and then to manage relationships with them
• Some investors are more focussed on short-term profits than long-term business viability, and may prioritise profitable exit strategies (such as a merger) over your vision for the future of the business

Best Uses of Equity Financing

Equity financing works well for large, uncertain expenditures, such as investment in innovation, research, for business start-up costs, or for any project with an uncertain pay-off date. Investors can provide the financial freedom needed to enter a new market or industry, without putting stress on cash flow, and in this sense equity financing works well for business expansion. And because repayments are not necessary, margins are better, and the increase in profits can be reinvested into the business to further accelerate growth. But you do have to be prepared to compromise on business ownership and decisions, which for many is a dealbreaker. As the saying goes: debt gets repaid, but equity is lost forever.

What Works Best for Scaling a Business?

Now you know the options and their relative merits, how can you decide which is right for you? There is no single solution that works for everyone; you must understand your business’s financial position, goals, growth stage, future needs, and long-term vision, as well as wider market conditions. But answering a few simple questions can help you streamline this process:

1. How important is it for you to retain full ownership/control of your business?
   1. Very → debt financing
   2. Not very → either option could work for you
2. How much financial risk are you willing to take?
   1. None → equity financing (as it puts no pressure on cash flow)
   2. Some → either option could work for you
3. Does your business have the predictable cash flow needed to make debt repayments?
   1. Yes → debt financing
   2. No → equity financing
4. Is rapid growth, or other longer-term goals, your priority?
   1. Rapid growth → either option could work for you
   2. Longer-term goals → debt financing
5. How quickly do you need funds?
   1. Quickly → debt financing
   2. Timing not important → either option could work for you

As both forms of financing have advantages, many business owners use a mix of debt and equity financing. Find out more on our blog, or speak to a Swiftfund expert to discover how you can access convenient, affordable business financing.

Many businesses in the post-Brexit economy hope to expand beyond our borders, to take advantage of the many benefits international operations can offer. And while this is not as simple as it used to be, it can still be a viable and profitable route to growth – if you have the capital to back it up. 

Why Extra Capital Matters

Basically any form of business expansion requires cash, and international expansion is no different. If anything, it is even more imperative, because there are so many potential obstacles and unknowns when starting out in a new country. And using existing business profits, savings or assets to fund an expansion is usually considered unwise; why risk your current business operations, when you can access business funding that will allow you to be nimble, flexible, and efficient, all while safeguarding your existing platform. External funding can allow you to weather uncertainty and emergencies, jump on opportunities, and move much more quickly than using existing business revenues. All of this will, in turn, expedite your transition to profitability in your new location.  

Where to Raise Capital

As we’ve discussed before in this blog, there are many different types of business financing, all with their own pros and cons. What’s interesting about international expansion is that the way in which you intend to expand, and where, will affect what type of financing will make the most sense. 

This is because every territory has their own laws around business registration, set-up, domestic financing, and financial security. Most countries do not allow foreign entities to establish a local presence and then immediately obtain a loan within that country. This puts the onus on businesses to obtain capital from their base country, in order to fund their expansion into another. However, some UK lenders have caveats on their loans that state funds cannot be used to fund business activities in another legal jurisdiction (because if there is a default on the loan, the lender may have limited legal recourse for recouping funds/assets held outside the UK).

Another complication is that interest rates and other loan terms can vary significantly between countries, so it may be significantly more cost-effective to borrow in one place versus another. This can also vary between types of financing, so in some countries, short-term financing has very different costs, legal obligations and protections than in the UK, while long-term borrowing is more similar.

Types of Business Capital for International Expansion

All of this complexity can make finding the right capital for your expansion tricky. You will first need to decide where you are expanding into, and how. This should be part of your strategic growth plan – your detailed business plan outlining short and long-term goals, expansion methods, financial forecasts, and so on. Knowing exactly how much you need to borrow, for what, will make every other aspect of your financial decision-making much simpler.

Then you need to consider your three main options: domestic funding (i.e. funding from a lender in your home country), foreign funding (i.e. funding from a lender in your target country), and global funding (i.e. funding from a lender that operates across jurisdictions and specifically works with international businesses). What is available to you, of these three, will depend on your business’s existing financial situation, your business plan, the country you are expanding into, and the type and scale of funding you are seeking.

Then, within the market you choose, there may be multiple different types of funding available, including traditional business loans, merchant cash advances, angel investors, crowdfunding, government grants and loans, peer-to-peer loans, venture capital, and even bad credit loans. Not every type of financing is right for every situation or every borrower, and this is why knowing exactly how much you need to borrow, how you intend to use the funds, and your business’s financial circumstances, is so crucial. You can then prioritise affordable, sustainable funding options that provide you with the flexibility and stability you need to meet your business goals.

Benefits of International Expansion

Given the intricacy of funding international business expansion, you may be left wondering whether it’s worth it. But there’s no doubt: growing your business into a new market can be a significant driver of success. It can allow your business to:

• Diversify revenue streams
• Access new, much broader customer bases
• Increase brand awareness
• Access new talent pools
• Lower costs (e.g. on property, payroll, inventory etc.)

Research from HSBC shows that 87% of UK businesses trading internationally intend to expand further over the next 12 months, showing that the overwhelming majority experience the positive impacts of this business model.
If you’re interested in maximising your business’s growth via domestic or international expansion, talk to Swiftfund. We can help you navigate the tricky world of business financing to find the best solution for your circumstances.

Businesses rarely grow without a dedicated effort to make them do so; growth takes planning, time and money, and external business financing is a very common tool in this endeavour. There are a few different ways to use this tool though, and not all are created equal. Here’s what you need to know: 

Start with a Plan

Possibly the single most important factor for a business’s growth is its plan for growth. It’s simply not enough to decide you want to expand your business – you need to know how, in detail. Specifically, you must:

1. Determine your business goals and objectives.
2. Identify and evaluate different methods for achieving these goals and objectives, making sure to calculate and compare the return on investment (ROI) of each.
3. Select the paths to growth with the best ROI, ensuring that any investment of loan funds will increase profits at least enough to cover loan repayments.
4. Create a detailed action plan to implement your chosen changes, and a budget based on planned investments, forecasted increases in revenue, cost savings, loan repayments, etc. Remember to include timelines; 12 months, 3 years and 5 years are commonly used milestones.
5. Set your business goals and measure business performance against them, so you can manage growth throughout its progress; goals should be specific, measureable, attainable, relevant and time-sensitive (smart).

With a comprehensive plan in place, you can be sure that your business is best placed for maximum growth. 

Areas to Focus on for Maximum Growth

There are many different routes to business growth, and every business needs to assess the potential of each. But whilst every business is unique, and so may benefit from a different combination of investment strategies, there are a few tried-and-tested ways to support sustainable business growth:

Marketing

If you spend nothing on any other part of your business, but invest in a successful marketing campaign, you will increase sales and grow profits. And a successful marketing campaign coupled with other changes, such as physical expansion or product changes, can yield significant returns. A good marketing campaign may use any number of tools (digital marketing, website improvements, promotional events, lead generation advertising, etc.) to boost brand awareness, find and attract new customers, expand market share, and increase customer loyalty. Research shows that the benchmark for a ‘good’ marketing campaign (across industries) in the UK is an ROI of 500%; a great campaign can yield an ROI of 1000%; and a campaign with an ROI of less than 200% is considered poor.

Infrastructure

Using loan funds to invest in your business’s infrastructure may not be a quick way toward growth, but it is an effective one. Whether it’s equipment, physical premises (renovation, expansion or purchase), or technology (point-of-sale system, software, website, etc.), improving your infrastructure can:

• Improve productivity and efficiency
• Increase capacity
• Improve customer experience
• Avoid unnecessary interruptions to operations due to old/faulty tools
• Provide a competitive edge
• Reduce costs and waste
• Position the business for future growth

All of which support growth. The exact ROI of any infrastructure investment depends on the area of investment, the exact investment made, the industry you operate in, and the infrastructure being replaced/upgraded – so it’s worth considering your business’s current position before deciding exactly where to invest. For example, if you know that your operations are currently very inefficient, investment in tools to increase efficiency may have a higher ROI than investment in property. 

Development

Development means different things to different people, but to grow and sustain growth in any business you need to be aware of what it means in your industry and for you. It could mean developing new products or services; it could mean developing new business partnerships; it could mean developing processes to improve operations. But ongoing development of some kind is necessary for continued growth; without it, a business will stagnate. And all forms of development require investment. 

So consider your business’s goals and objectives, in both the short and long-term. If you think product development is a fruitful area for growth, you will have to invest in market research, product testing, and new inventory purchases. If partnerships are the goal, then investment in acquisitions, relationship management, and personnel may be required. Each of these has their own pros, cons and ROIs (and most development initiatives have better long-term ROIs than short-term ones). Don’t try to focus on too many different areas at once; find development opportunities that marry well with other areas of business investment, so that your efforts complement and reinforce each other, rather than compete for space.

Other Ways to Grow Your Business

Of course, the above does not encompass all of the possible ways to invest in or grow a business. You might also want to consider:

• Hiring new staff and investing in staff training
• Using loan funds to mitigate business risks (e.g. emergencies, compliance, etc.)
• Improving cash flow management
• Strengthening inventory management
• Paying off high-interest debt to minimise impact on profit margin

You can find out more about British business loans, government grants and other forms of business funding on our blog. And if your business needs access to affordable, flexible financing, talk to Swiftfund today.

More than a quarter of all business borrowing in the UK is for the purpose of company growth; but simply accessing business financing does not in itself guarantee quick growth or success. You have to know how to use your business loan to most efficiently scale. There are ten key areas to focus on:

Technology & Equipment

Without the right equipment and technology, your company cannot deliver its services to clients and customers in a timely and effective way. And if you’re expanding, it’s a given that you’ll need additional capacity to meet higher demand. This may involve new purchases, or upgrades and repairs to existing items, but in either case this is a smart use of loan funds. Investment in technology and equipment allows your business to improve efficiency and benefit from their use right away, while paying for them over time (and hopefully from the additional revenue they help to generate).

Staff

The same is true for staff; recruiting new employees and training and retaining talent is a necessity if you’re expanding operations. But this can be expensive, and using loan funds to cover the costs allows you to focus on building the right team upfront; they can then help to support the company’s growth more quickly.

Working Capital

Every business needs working capital, but finding the extra funds needed for utilities, property costs, wages, inventory and everything else that comes with scaling up a business can be difficult, especially in the early stages of expansion before income has increased. Loan funds can be used to cover these day-to-day costs and keep your business operational at its new size, while changes are being implemented.

Cash Flow Management & Credit

One of the significant benefits of having the appropriate amount of working capital through a transitional period is the ability to manage cash flow advantageously. This means being able to anticipate and cover upcoming expenses, according to the timeline that best works for your business’s needs, not according to your immediate revenue. It also means ensuring that all bills and expenses are paid for on time, which helps protect and build your business’s credit score. Making business loan repayments on time also builds business credit. A strong business credit score can then help your business access financial products at beneficial rates in the future.

Inventory

Buying in bulk can be expensive, but meeting the increased demand on inventory that inevitably comes with expansion is crucial. By using loan funds to stock up you can expand operations while avoiding a big hit to your regular cash flow. Similarly, loan funds can be used to widen your product line, and even experiment with possible new products, without undue concern for the immediate revenue-generation ability of these products. This aspect of a business’s growth can take months or even years to implement without the external assistance of business financing.

Physical Premises

Most growing businesses need more physical space, which means opening new locations or expanding/renovating existing ones. But this isn’t cheap; it involves significant capital, which must be spent before any positive effect can be felt on revenue. Using loan funds to cover property costs is a smart way to invest in the long-term revenue-generation of your business, and allows you to begin scaling your business sooner than you otherwise would be able to.

Marketing

Having better technology, the right staff and a new location may cover the physical needs of expansion, but without a broader customer base, you will not be able to generate enough business to sustain your new size. That’s why marketing is such an important component of scaling a business, and why using loan funds to invest in a marketing campaign is so necessary: you need to be able to adopt digital marketing, public relations, advertising, and any other marketing tactic necessary to increase brand awareness and grow your market share quickly, in line with your capacity. 

Research & Development 

Research and development is not confined to tech start-ups and healthcare companies; all businesses, in all sectors, can benefit from investing in this area, to develop new products and services, improve existing ones, or simply to understand customer base and market trends in order to stay in line with them, rather than playing catch-up. 

Innovation

Customers flock to businesses with the best, most competitive services, and you need to be prepared to innovate to stay relevant. Having the capital on hand to nimbly react to market changes and time-sensitive opportunities, as well as to stay abreast of market trends, will ensure you retain customers and win new ones faster than your competitors. And these customers are vital to sustain business growth.

Partnerships

Expansion doesn’t always mean opening a new location or scaling up your product line; it sometimes means partnering with other businesses, acquiring another business, or merging with another business. These are all fast ways to scale, but all require significant capital upfront. They also require your business to be in a healthy financial position – otherwise you won’t be able to attract beneficial partners (or even investors). A business loan can provide you with the stability and capital needed to attract and execute such a partnership.

To find out how your business can access convenient business financing, talk to Swiftfund. And check out our blog for more information on all of the different types of funding available in the UK.

If your business needs an injection of cash, there’s a huge range of possibilities. Business loans are still the most common form of financing in the UK for established enterprises, but crowdfunding and angel investors are increasingly viable options, for both new and existing businesses. But how can you know which route is right for you? Let’s look at each option in detail to find out:

Crowdfunding

What is it?

Crowdfunding is an umbrella term for the type of fundraising that involves receiving funds from any number of members of the public. Sometimes investing individuals are offered benefits (such as products, discounts, membership, etc.) in return for their money, and sometimes they’re offered a stake in the business. The latter is known as equity crowdfunding. 

One of the huge benefits of crowdfunding is the flexibility it offers. Almost any amount of money is theoretically available, for almost any purpose, and you as a business owner can decide what you’re comfortable offering in return. Anyone can choose to invest in your business. Large sums can be generated quickly, especially for innovative products, among a pre-existing loyal customer base, or for ideas with strong growth potential. But it isn’t all roses: a successful crowdfunding campaign needs a solid pitch, rigorous administration, relationship management with investors, and you may have to give up a portion of ownership of the business.

Crowdfunding Pros

• No loan repayments
• Access to potentially large sums of money
• Funds can be used for any business purpose (as long as it’s in line with what investors have been told the money will be used for)
• Allows a wide range of people to support your business, not just traditional investors
• Raises brand awareness
• Appropriate at any stage in a business’s lifecycle 

Crowdfunding Cons

• You may have to relinquish outright ownership of the business
• Investors may influence decision-making in the future
• Investors may require a share of future profits
• Can be time-consuming to set-up and administrate (although use of a dedicated crowdfunding platform can help ameliorate this, for a fee)

Angel Investors

What are they?

Angel investors are a lot like equity crowdfunders, but there are fewer of them and they invest larger sums of money. They’re sometimes formed into groups or syndicates of high net worth individuals, and they tend to focus on early-stage businesses and start-ups. The average angel investor invests £25,000 in the UK, but the range is usually anything between £10,000 and £50,000 per investor. 

As with equity crowdfunding, angel investors will expect a share of the business (and/or profits) in return for their cash. However, as angel investors are typically business professionals themselves, and keen to maximise their potential returns, they may offer their own expertise to help guide the business. Their involvement can lend credibility to a new business, and their experience may make the success of your venture more likely.

Angel Investor Pros

• Can provide access to valuable expertise, industry experience and connections
• Flexible investment terms
• No loan repayments
• Boosts business credibility

Angel Investor Cons

• Only appropriate for early-stage businesses
• Requires relinquishing some control of the business
• Limited funding amounts (unless you are able to attract the attention of a syndicate)
• Angel investors expect quick profits, which can put pressure on business owners
• Stiff competition to attract angel investors

Business Loans

What are they?

The majority of businesses in the UK still turn to traditional business loans when they need cash, and this may be because this form of business financing allows you as the business owner to retain full control of your enterprise. And business loans come in a huge range, to cater to almost any need. There are term loans, equipment loans, start-up loans, secured loans, unsecured loans, cash advances, revolving credit facilities, bad credit loans… The options are plentiful, and mean that you can borrow anything from £500 to £1 million or more. 

However, every loan has to be repaid in full, including interest and fees, and this can put a strain on a business’s cash flow. Failure to make loan repayments will have an impact on a business’s credit, and may imperil the business’s ability to access financial products in the future. And while some loans can be obtained very quickly (within a day or two), the larger the loan is, the harder it will be to qualify for and acquire – meaning it is tougher for new businesses, small businesses or those with unconventional business models to access them.

Business Loans Pros

• Retain full ownership and control of your business and future profits
• Accessible to businesses of any size and at any stage in their lifecycle
• Funds can be used for any legitimate business expense
• Can be obtained quickly

Business Loans Cons

• Loan funds must be repaid (regardless of business performance)
• Repayments may adversely affect cash flow, and increase running costs of the business (thereby increasing sales needed to break even)
• Borrowing amount will be determined by loan type, lender, and the borrowing business’s financial situation
• Business’s credit is at risk if loan repayments are missed
• Business assets may be at risk if used as collateral on a secured loan and loan is defaulted on

Each type of business financing has its own pros and cons; there is no one-size-fits-all solution, so it’s incumbent on each business owner to understand what will work best for them. Many business owners use a combination of financing types to achieve their goals. 
To find out more about different types of business financing, read our blog; or contact us to access flexible and affordable financing right away.

The UK government is keen to support British businesses, especially small and new businesses, and when paired with the wide range of private lenders they create a vibrant and accessible funding landscape. Here are the main programs currently running in the UK, that may benefit your business:

Start Up Loan

Government-backed loans for £500 to £25,000 are available to new and small UK-based businesses that have been trading for less than 36 months. Technically, a Start Up Loan is not a business loan, but an unsecured personal loan, so the person applying will be credit checked. Repayment periods can be anything from one to five years, and all loans are charged a fixed interest rate of 6%. There are no fees, and recipients of the loan also get free mentoring via the program. This program has proven enormously popular among new enterprises, as the program is specifically intended for set up and growth (although loan funds can be used for almost any legitimate business expense).

Growth Guarantee Scheme

The Growth Guarantee Scheme is the successor to the Recovery Loan Scheme, and it aims to help small businesses access a wide range of financing products offered by private lenders, by providing a 70% government-backed guarantee. To qualify a business must be UK based, generate more than 50% of its profit from UK trading, and have a turnover of less than £45 million. Amounts of £1,000 to £2 million are in theory available, with different products (e.g. term loans, overdrafts, invoice financing etc.) offering different limits, as well as different term lengths and fees. 

This program essentially means working with a private lender, with the government simply providing backing for the financing rather than administering it themselves. Only certain lenders participate in the program, so it’s important to find one that does if you’re interested in this program.

Innovate UK

UK Research and Innovation offers a range of funding programs, several of which are open to for-profit businesses. Their bread-and-butter is technology, healthcare and research, but that doesn’t mean a business has to be in one of these sectors to qualify. Both grants and loans are available in a range of sizes, with specific eligibility criteria and terms dependent on the program being targeted. Generally though, this is a great place to look for funding if your business is engaged in innovation of any kind. 

Seed Enterprise Investment Scheme

For businesses looking to raise money from investors as it begins to trade, the Seed Enterprise Investment Scheme is worth a look. Businesses must be newly trading, UK-based, with gross assets of less than £350,000 and fewer than 25 full-time equivalent employees. Up to £250,000 is available, but the rules around the program – both for the business itself and investors – are quite strict, so it’s worth reading them in full before pursuing an application. 

Funding Circle UK

Not all government-backed programs involve traditional mainstream lenders. Some, like Funding Circle, are peer-to-peer lenders. This means that the money for their funding program comes not from a bank’s coffers, but from other enterprises just like yours. At the moment Funding Circle is offering small to medium sized businesses with at least two years of trading history unsecured loans of up to £350,000, and secured loans of up to £1 million, with terms ranging from six months to five years.

Region-Specific Programs

Although there are several UK-wide programs, such as those mentioned above, the majority of government funding programs in the UK are region-specific. Some of these are extremely specific (i.e. for businesses in one specific city or county), while others are more general. For example, Scottish businesses have access to a range of specialised programs, including:

• Scottish Growth Scheme
• Scottish Venture Capital Fund
• Business Energy Scotland SME Loan Scheme
• A multitude of other programs from Scottish Enterprise

While businesses in Wales can apply to the Business Development Bank of Wales, and those in Ireland have multiple options via Enterprise Ireland.

You can find a full list of government funding programs online; this list is updated regularly, and it’s well worth a search for programs in your specific area and sector. Almost every industry and city have their own programs.
Or, if you’re struggling to find a grant or government-backed funding option that works for your business, you might want to consider other forms of business financing. Private lenders can offer large borrowing amounts and attractive interest rates, as well as flexible eligibility requirements and terms. For more information, speak to Swiftfund, or take a look at our blog for more general information.

Bad credit can make life difficult for business owners, especially when it comes to securing business financing. Fortunately, there are ways to access business loans even with a poor credit history, or no credit history at all. You just need to know your options:

Get a Bad Credit Business Loan

A bad credit business loan works much like a standard business loan – with access to a lump sum that must be repaid over a set period of time – but it’s offered specifically to borrowers with less than ideal credit. Most high street lenders have a minimum credit threshold, so bad credit loans are offered by alternative lenders, including many online lenders. They are available to borrowers with poor to average credit, and are usually capped at a maximum loan amount of £50,000.

Bad credit lenders provide a vital avenue to funding for businesses that are turned away from mainstream lenders, but it’s important to know that bad credit business loans have higher interest rates than other types of business loan. This is because the lender off-sets their higher risk in lending to a bad credit business by charging more. And because higher interest equals larger loan repayments, it can be easier for borrowers to fall behind on their loan repayments and further harm their credit. So it’s crucial you understand the full cost of a bad credit business loan, and are sure your business can meet these costs, before pursuing this option.

Provide Loan Security

Lenders use credit score to determine how reliable a borrower is, and how likely they are to make their repayments; the higher the borrower’s score, the lower the perceived risk to the lender. Providing collateral (or “security”) for a loan is another way to lower a lender’s risk; collateral can be seized in lieu of loan repayment in the event a borrower defaults on their loan – so the lender is not left with nothing. Providing collateral makes it easier to qualify for a loan, and to access lower interest rates; this is true for all borrowers, but can be especially powerful for poor credit borrowers who are struggling to qualify for a loan. 

So if your business has a valuable asset, such as property or equipment, you may be able to use it as collateral for a business loan. And a secured bad credit loan will have a lower interest rate than an unsecured bad credit loan, so it’s a cheaper option. However, if you fail to make your loan repayments, the business asset you have used as collateral is at risk of being seized, leaving you with nothing.

Find a Guarantor

Another way to lower a lender’s risk in lending to a bad credit business is to use a loan guarantor. If your business has poor credit, but has a relationship with a business or individual with good credit, then having the good credit borrower co-sign your business loan will provide the lender with an extra level of protection. In the event your business fails to make its loan repayments, the guarantor is on the hook for them. Again, by lowering the lender’s risk in lending to you, it will be easier to access loans, and interest rates will be lower than with an unsecured, unguaranteed bad credit loan.

Consider Alternative Forms of Financing

All of the above is true for business loans that rely on credit score, but not all forms of business financing do. Alternative financing options are available to all businesses, but they can be especially helpful to businesses with poor credit, no history, intermittent cash flow, or other characteristic that makes qualifying for a traditional loan difficult. 

Some alternative forms of financing are more expensive than traditional business loans, but this is not always the case, and borrowing amounts from hundreds to hundreds of thousands of pounds are available. In addition, alternative forms of financing can provide significantly more flexibility than a business loan. So consider whether any of the following would fulfill your business’s financing needs:

• Merchant cash advance
• Peer-to-peer loan
• Private funding
• No credit check loan
• Government loan

Just remember that the key to finding the right, most affordable option for your business is to shop around. Even businesses with bad credit have multiple options, so find the one most suitable for your needs and circumstances.

Take Steps to Improve Your Credit

Good credit is a signal of financial health, and it’s important to take steps to improve and maintain your business’s credit score. Some of these steps can have an immediate impact, thus increasing your chances of getting a business loan. Such steps include:

• Paying off existing debts
• Closing inactive business accounts
• Reviewing your credit report and identifying/correcting any errors
• Limiting new credit applications

Other, longer-term steps to improve credit include:

• Maintaining a healthy cash flow
• Utilising a mix of credit types
• Paying all bills on time
• Keeping your business accounts in good order

If your business needs access to affordable financing today, without the hassle of a credit check, talk to Swiftfund. We can help you with convenient, flexible cash in just a few days!

If your business needs an injection of cash, you’re probably considering a business loan of some kind. But knowing how much you can borrow – and from where – is not necessarily straightforward. Here’s everything you need to know about business financing eligibility:

Factors Affecting Business Borrowing

The UK is home to dozens of different business financing products, from dozens of different lenders, and right up front it’s important to know that all this variety impacts loan eligibility and loan amounts. Just because one lender uses certain metrics to determine how much of a loan your business can afford, does not mean that another lender uses these same metrics, or will come to the same conclusion. Similarly, different products can provide the same borrower with access to different borrowing amounts.

This is why getting one answer to the question “how much can my business borrow?” is so tricky. The truth is, it depends. But you can reasonably expect that most lenders will assess a business financing application based on:

• Business credit score
• Age/history of business
• Business revenue and profit
• Existing business debts
• Business assets that could be used as collateral for a loan

Larger or longer term loans may also consider your business plan, while newer businesses may be judged partially on the business owner’s personal credit.

The fundamental assessment that any lender will make when considering whether to lend your business money, and how much to lend it, is this: will the business be able to commit to and afford all of the repayments, given its cash flow, history and perceived stability? A lender will only lend an amount that, in their estimation, your business will reasonably be able to repay.

How Type of Financing Affects Borrowing Amount

As mentioned, different types of financing offer different minimum and maximum borrowing amounts. This means that, even for a business with the very best financial credentials, there is a cap on how much it can access via any given product. So if your business needs a specific amount, you must ensure you’re focussing on products that can offer this amount. That’s not to say that your business will necessarily qualify for that amount; but there’s no point in applying for £500,000, even with a perfect credit score and amazing revenue, if the type of loan you apply for has a maximum loan value of £25,000!

Here’s a quick breakdown of the average borrowing ranges of the most common financing types:

• Small business loan (unsecured): anything from £1,000 to £750,000
• Small business loan (secured): anything from £1,000 to £15 million
• Large business loan: up to £100 million
• Business line of credit: anything from £1,000 to £250,000
• Business credit card: anything from £1,000 to £250,000
• Equipment loan: anything from £1,000 to £500,000 (typically secured against the equipment in question)
• Merchant cash advance: anything from £3,000 to £300,000 (typically capped per borrower at 150% of monthly card sales)
• Start-up loan from the government: £500 to £25,000

How Lenders Affect Borrowing Amount

There’s one final complication: lenders all have their own rules and calculations. This is because every lender has their own profit targets, risk assessments, and proprietary models. The result is that they can have their own minimum and maximum borrowing amounts, which may differ from others on the market, and the way they calculate how much they’re willing to lend to any given borrower is bespoke. All of which means that you could apply for the exact same product from two different lenders, using all of the same business data, and you could be offered two different loan amounts.

It’s therefore crucial to be aware of how different lenders operate. For example: traditional high street banks tend to have the strictest, least flexible lending criteria of the whole market. These criteria are because banks are risk-averse, and they result in smaller loan amounts overall, to only the most qualified borrowers. Other lenders, for example online lenders, care less about credit when determining loan amount, and may instead focus solely on cash flow. So it’s possible to borrow more money from an online lender if you have a newer business or bad credit. You may be charged more in interest, but that is the price you pay for access to a loan you might not otherwise be able to get.

Understanding your business’s financial position, before you choose a lender and financing type, will get you closer to borrowing the loan amount you need. It is still necessary for you to make sure your business can afford its loan repayments though, and if a loan’s repayments are untenable, you may need to consider borrowing less than you initially wanted.

A note on business loan calculators:

There are many business loan calculators online, and these are very helpful tools for understanding how loan amount, interest rate and loan term all affect loan repayments. These tools can give you a quick indication of how much any given loan will actually cost. However, they can’t tell you how much your business will be able to borrow. The only way to determine this accurately is to provide a lender with your business’s financial details, so they can make a calculation.
To find out more about quick and convenient access to business funding, talk to Swiftfund today. And check out our blog for more helpful information on the ins-and-outs of business financing.