6 SME Business Options Beyond Overdrafts

by Startacus Admin

For small businesses, using a traditional bank account overdraft facility to overcome cash flow problems has become a much less readily available option. Thankfully, there are other alternatives to bank overdrafts emerging for SMEs and the following options are already helping thousands of small firms find financial flexibility when they need it most.

1 – Invoice factoring and discounting 
Invoice factoring has been around for a long time as a finance solution for SMEs but its popularity and prevalence as an alternative to overdrafts has grown rapidly in recent years. This growth has been fuelled in part by sheer demand from companies who can no longer rely on traditional lenders to access credit or raise cash when they need it. But it has also been encouraged by the spread of online platforms that simplify and streamline the way invoices can be leveraged to generate cash when it’s needed.

2 – Fast business loans
When it comes to cash flow concerns for small businesses, speed is very often of the essence and the sooner loans can be accessed the better. Fast business loans are designed to be simple, effective and flexible as a means of accessing up to £10,000 in credit quickly and with a minimum of fuss. Of course, no loan should be taken on lightly or without due consideration but where access to finance can support growth or turn a small company’s fortunes around then a fast loan can make a massive difference.

3 – Merchant cash advances
There are variety of finance facilities available now that are designed specifically with the needs of shop owners, retailers and restaurants in mind. They are referred to generally as merchant cash advances and they are designed essentially as loans that can be taken out and then repaid on the basis of a percentage of your revenues.

4 – Asset refinancing
If your business has been struggling to cope with cash flow pressures but you have money tied up in assets of any sort, including machinery, vehicles or computing systems etc, then you can potentially refinance them to raise funds for the short term. The idea is basically that you would sell the ownership of some of your more valuable assets to create a cash injection but then lease them back on pre-agreed terms.

5 – Revolving loans
The retreat among major high street banks from the small business sector and particularly the SME overdraft market in recent years has left something of a void where these services once were. One new form of financing currently emerging to fill that void is revolving loans, which can be complex but which are essentially designed to function in much the same way as a traditional overdraft. This option though is only really available to companies with a strong trading history and a solid business case behind them.

6 – Peer-to-peer and crowdfunding 
Peer-to-peer lending and crowdfunding has taken off dramatically as a finance option in recent years, mainly thanks to most prominent success stories that managed to capture headlines and the imaginations of any number of would-be startup operators. However, from a small business perspective, the option can be useful on a relatively small scale and in ways that help a company overcome a particular set of financial difficulties, rather than to transform their financial prospects entirely.

The key point about alternative financing for small businesses is that the range of options available is growing and it can be complex, so it’s important to get good advice and find the right route forward given your specific circumstances.

Conrad Ford is the founder of Funding Options, which provides a range of online tools to help firms and their trusted advisers to manage funding and cash flow.

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Published on: 30th September 2014