By Rob Straathof, CEO, Liberis
Growth is a top priority for many businesses however, with so many options, payment plans and providers out there, finding the right financing to fuel your growth may initially seem daunting. As we can see reflected in the statistics: over 60% of UK SMEs are aware they require funding to grow, a whopping 57% are unsure how to obtain funding.
To gain a competitive edge and achieve growth, it’s therefore imperative to research and familiarise yourself with your financing options. To help, below we have put together five financing options to consider, along with the pros and cons of each one.
- Bank loan
This traditional option offers a number of benefits for businesses, including reliability and the ability to secure high sums of money over longer terms with reasonable interest rates. This makes it ideal for businesses with a solid credit history who aren’t in a hurry to receive a lump sum. However, while a bank loan is reliable and may be a sure option for some, it may not always be the best choice for those looking to receive a cash injection quickly, or those without a perfect credit score.
Who it’s best for: Entrepreneurs with strong credit history who prefer traditional options and are not in a hurry to receive cash.
- Cash advance
For businesses experiencing seasonal peaks and troughs in demand, or those looking for flexibility, a short-term quick funding solution such as a Business Cash Advance may be the best option. Linking repayments directly to your daily card takings, these types of advances provide more flexibility and will enable you to automate repayments quickly and easily.
Who it’s best for: Small businesses experiencing seasonal spikes and those looking for a speedy financing solution alongside a more flexible / convenient way to repay.
- Business credit cards
While credit cards are a highly convenient form of finance, giving a quick flow of funding to busy businesses, we wouldn’t advise going down this route unless you’re comfortable with a high level of risk. This is because credit cards most often come with high interest rates and increased vulnerability to theft or fraud.
Who it’s best for: Small businesses looking for an immediate cash injection, usually to purchase stock or equipment.
- Invoice factoring
If you need funding for everyday expenses to keep cash flow steady, then invoice factoring may be the right funding option for your business. This option allows you to advance funds whenever your business issues new invoices, so you can get paid straight away.
The good news is that your property won’t ever be at risk due to the finance being unsecured. This type of funding is flexible and will allow you to outsource collecting payment from suppliers. However, be cautious as factoring can sometimes be risky, expensive or difficult to get out of.
Who it’s best for: Those who have issued invoices and require funding to keep cash flow steady.
If your business is in the early stages of development, with big ideas, a story and exciting project plans, crowdfunding could be the option for you. Thanks to its simplicity, crowdfunding is becoming an increasingly popular way to raise finance. Another bonus is that this form of finance isn’t solely based on a good credit history.
However, working on the dedication and faith of your potential consumer base, crowdfunding doesn’t have a guarantee that you’ll raise your required funds. Additionally, it’s not suited for small every day expenses, so you would be most likely to consider crowdfunding when launching a large project, such as a product launch.
Who it’s best for: Start-ups with a compelling story and big project plans!
There are many ways to finance a business, and we hope these tips will provide your small business with clarity on just some of the options available to support your business potential, goals and ambitions. By considering your business needs and researching your options, success is sure to follow.