Alternative finance is a broad term, encompassing many types of finance solutions.
Alternative finance simply refers to all non-bank financial options available to small businesses and includes various financial channels and processes that have developed outside of the traditional financial system (regulated banks and capital markets). Businesses gain more flexibility and variety, which ensures that the financial solution is the best fit for their business requirements.
At first, the term and the products it includes may seem daunting, but once understood, they reveal themselves to be credible and potentially beneficial for businesses of all types.
This article explores the different types of alternative finance products available at Funding Bay.
Small Business Loans
As a funding option applicable to businesses with less than 50 employees and a turnover below £6.5m, small business loans give a boost to young, emerging businesses without the stress of high-interest rates and with free reign on how the borrowed money can be used. With a small business loan, credit rating and trading history isn’t as important during the application phase as the youth of the business is taken into consideration. This type of loan is ideal for businesses who looking to take advantage of an exciting opportunity, or simply for those who would like a quick stopgap of working capital.
Unsecured Business Loans
Unsecured business loans boast a similar application process and similar benefits to small business loans, however, there are no restrictions on business age or business turnover. Rather, the importance lies within the credit rating of the respective business, with preference given to those with a solid financial history. These types of loans are especially suitable for businesses that want cash to scale and develop, but who do not want to part with equity.
Asset Finance
Asset financing is mainly suited to large investments that aren’t immediately affordable to a business, but represent a solid investment in its future; the finance terms are calculated based on the value of the desired asset and the duration of repayment, making this a suitable solution for businesses that are willing and able to pay incrementally through a manageable repayment plan towards an investment. The desired asset in question can be however large or small, from tiles to heavy-duty construction equipment. At Funding Bay, we work with a variety of asset finance lenders, namely: Close Brothers, Aldermore, Lombard, and Blackhorse, among others.
Invoice Finance
Invoice finance is a solution for businesses with cash-flow issues that result in unpaid invoices; essentially, capital is raised against pending invoices meaning that business cashflow, and by extension, business growth can be maintained in a fast-paced trading environment. With invoice financing, businesses free up some internal capacity as they allocate the responsibility of fulfilling invoices to lenders. At Funding Bay, we work with a variety of lenders that help businesses with their invoice financing, such as Lloyds Bank, Bibby, Nucleus, and Muse.
Property Finance
With property finance, capital is secured against commercial property – such as offices, retail, industrial or leisure premises, or residential properties – with the aim of developing, building or purchasing said property. Businesses can look to property finance when they want ti invest in commercial property for expansion and growth. We offer property and bridging finance options at Funding Bay through 4syte Funding.
Stock Finance
The stock financing solution sees finance made available up to a credit limit based on your organisation’s size and credit history. Here, funds can be requested and received at short notice. This allows businesses with a fast turnaround of high-value stock to replenish supply quickly when it becomes available if they know they will be able to shift the items equally quickly. We work with FBX Capital to help businesses access stock finance.
Supply Chain Financing
With supply chain financing, borrowing occurs against your accounts payable rather than receivable. Making this option for businesses with poorer credit history, or those looking for healthier cash flow and for a slicker supply chain. Benefits are spread throughout the supply chain, too: suppliers can get paid more quickly, and buyers are able to extend their payment terms. A supply chain finance lender we work with at Funding Bay is Bibby Financial Services.
Trade Finance
Trade finance signifies financing for trade, and it concerns both domestic and international trade transactions. A trade transaction requires a seller of goods and services as well as a buyer. Various intermediaries such as banks and financial institutions can facilitate these transactions by financing the trade. This makes transactions between businesses occur more seamlessly.
Merchant Cash Advance
Merchant Cash Advances (MCAs) are ideal for businesses that process much of their revenue through their credit card terminals. The MCA advances funds based on their average monthly receipts and the repayments are then taken directly out of the future revenue. MCAs are particularly popular with businesses in the leisure/retail sectors where a large proportion of their revenue occurs on the shop floor. At Funding Bay, we work with Nucleus to provide access to MCAs.
Research & Development Tax Credit Finance
A research and development (R&D) tax credit loan is a new type of financial instrument that uses a company’s future R&D tax credit payments as collateral for a debt facility. With an R&D tax credit loan, the company can have access to the funds in the year in which the spending occurs. ArchOver is one of our accredited lenders associated with R&D tax credit finance.
For any business, each alternative finance solution presents different benefits and fulfills different business needs.
Considering alternative financing solutions for your business? Get in touch with Funding Bay. Our team will be happy to assist you.
