Ambitious medium-sized businesses looking to grow or improve their business more quickly may be unaware of the process of applying for external finance support. Around two thirds of UK businesses consistently use business funding, for instance in the form of external finance with trade credit and personal injections of funds, according to The SME Finance Monitor’s March 2018 report (which is based on 18,012 interviews conducted with SMEs across 2017).
Depending on your business model, the industry in which it operates, your trading history and annual turnover, you may be eligible for various types of business financing. Touch Financial have expert knowledge on the following financial solutions.
Invoice Discounting Facilities
One of several invoice finance products offered on the UK business market, invoice discounting enables firms to unlock the funds tied up in their invoices, utilising these to pursue their business’ growth and expansion immediately rather than waiting 30-90 days for customer payments. Unlike invoice factoring facilities, however, discounting enable firms to retain control of their credit collection systems and keep the arrangement between themselves and the financier without the need to disclose to their customer(s).
It’s thanks to these unique strengths that invoice discounting facilities can prove invaluable to more established firms whose annual turnovers eclipse £250,000, with the potential applications ranging from managing day-to-day operating expenses to business expansion. Below is a brief step-by-step on the process of applying:
|The Order||Cash Advance||Repayment|
|First raise an invoice to your customer(s) with details of the required payment amount and due date.||Your chosen financier will forward a pre-agreed percentage of the invoice’s value to your business, normally within around 24 hours of receiving the invoice copy.||Finally the customer pays their owed debts, the financier will forward the remaining cash sum (depending on how much advance funding they originally provided) to your business, minus any pre-arranged fees.|
Secured and Unsecured Business Loans
In the case of those firms seeking a different form of flexible funding more aligned with their business plan, business loans could be a more viable solution and like invoice discounting allow for you to grow or improve your business beyond its organic rate.
Whilst the facilities available on the UK loan market differ considerably from funder to funder, the vast majority are grouped into two main categories:
- Secured loans – which involve the provision of assets as collateral and could be particularly useful if you have a strong asset portfolio to rely on.
- Unsecured loans – involve a greater focus towards creditworthiness and personal guarantees which may be more suitable for you if your business has mainly intangible assets such as intellectual property.
Here’s how to access business funding through a loan facility…
|Loan Selection||Funding Injection||Repayment|
|Start by assessing the most suitable loan for your business. Bear in mind factors such as the funding amount needed, loan term, APRs, your trading history and whether you’re able to offer assets or a personal guarantee.||Applications can take 48 hours to 1 week to process. Once your arrangement and financier are chosen, the first funding instalment will be provided to you for your business to start investing as it sees fit.||Going forward you’ll repay the agreed loan amount at regular intervals, with the repayment value either remaining consistent or varying depending on your chosen arrangement’s APR.|
Merchant cash advances
Enter merchant cash advances, a type of finance payment agreement which offers advance funding for businesses based on a percentage of their projected debit/credit card sales. Merchant cash advances have a scalable feature whereby funding provided will remain proportional to your forecasted monthly card transactions. This means if you are due a quiet period what you’ll expect to pay back will be less of a strain, thereby giving you peace of mind..
|Arrange Your Advance||Receive Funding||Business Investment|
|Your chosen financier would prefer to see at least 6 months’ worth of card payment statements and proof of a healthy sales performance through your card terminal machine which processes your customer sales.||Once the relevant details and documents have been provided and reviewed by the financier (often in as little as 24 hours), you should then receive the agreed lump sum of funding straight into your bank account.||Now you can use your new funds as you see fit, whether for store improvements, obtaining new equipment or boosting your inventory. You’ll now have the requisite cash in hand to do so.|
With a greater focus on your business performance, a merchant cash advance can also aid you to invest in new software to manage your retail operations or renovate your firm’s property if it operates in the hospitality sector.
Find Out More About Business Finance for Medium Business
Be sure to visit our small business finance blog for additional details on how developing businesses can access the funding support needed to grow their operations. You’ll also find product pages for each of the solutions referenced here, wherein you can learn more about the differences between business loans, invoice discounting and merchant cash advances.