Could alternative funding be right for your business?

Traditional bank lending is in decline. Check out your other more flexible options…

Managing cash flow as a small business is always a challenge.

Whether it’s to cover invoices that are paid late, or a desire to take advantage of discounted stock prices, access to cash is critical to small business operations.

Why traditional lending isn’t sufficient

According to independent research conducted by Everline, nearly half (48%) of small business owners have cash flow concerns, and almost one in five (18%) suffer a cash shortage at least once a month, which means something isn’t quite working with the traditional banking system.

Despite a number of incentives designed to kick-start small business lending in the UK, including the much-promoted Funding for Lending and Business Bank schemes, three quarters of small businesses say they still aren’t happy with the service traditional lenders provide. With 35% of bank loan applications being rejected, and Bank of England lending figures from January this year showing a drop of £300m in small business lending, alternative routes to finance are needed to secure the future success of the country’s small and medium-sized enterprises.

It’s not just securing a traditional loan that’s hard for small businesses. Funding via a bank may not provide the right kind of finance solution. We know there’s significant demand for working capital credit from small businesses, who often do not need to borrow much (often less than £50,000) and who only need the loan for a couple of weeks or months.

This makes access to flexible credit necessary, yet banks simply aren’t set up to provide this kind of funding. The credit they provide is usually more suited to bigger businesses – available for fixed periods (more than a year), with little flexibility and requiring asset-based security, for example.

Traditional lenders seem to put a lot of hurdles in the way of finance. The application process is complicated with lots of form filling and supporting documentation needed. Even once submitted, the application goes through various stages of credit approval. A typical business loan application can take days to complete, weeks to be approved and even longer for the funds to arrive.

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A flexible alternative

In a business world where time is money and flexibility is crucial, this lending process is no longer fit for purpose. Astute business owners and directors recognise the need for agility, and are demanding more flexible credit services that allow them to control how much they want to borrow and for how long. Unsurprisingly, seven in 10 small businesses believe regular access to cash flow is important to business operations, and more than a quarter (29%) claim that a lack of cash flow is restricting business growth.

Using a confluence of technology and big data allows new, technologically advanced, lenders to improve the options available to small businesses. At Everline, our aim is to enable small businesses to run more efficiently by providing access to additional working capital funding whenever they need it, with unnecessary barriers to access removed – our application is online and straightforward to complete. This is where alternative funding can become a strong option, compared to traditional bank lending.

It’s essential that, as a small business owner, you research all your options when it comes to securing funding. Don’t necessarily assume that the bank is your only option, or that alternative lending is something you should only look into if your bank turns you down.

If you’re looking for flexible, working capital finance to bridge a gap in cash flow or to provide a boost to your business as you expand, alternative lending might be a better answer. Make sure you read up on all the options available to you, talk to other business owners, and consider all routes before selecting the best one for you and your business.

Russell Gould is managing director of Everline, the digital lender for SMEs.




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