What are the alternatives to traditional sources of funding?

Finding alternatives to bank loans and equity finance

Q: According to the Breedon Report, the funding shortfall facing small businesses in the UK is expected to be as high as £190bn in just five years. With traditional sources of finance coming under severe pressure, what are the alternatives?
John Wilde, sales & marketing director at SME Invoice Finance Limited, answers:

We recently commissioned an independent survey into the attitudes and perceptions of professional advisers and the findings of the report are revealing. An overwhelming 95% of advisers said that their clients had been refused overdraft facilities or had them withdrawn over the past 12 months. 80% of respondents added that the biggest challenge they face today is ‘banks removing or restricting facilities’.  More than two thirds of advisers cited ‘banks not lending’ as a major issue and almost three quarters of advisers indicated that ‘clients’ cash flow’ was a problem.

Equally of concern is the important and pressing educational role that will have to be fulfilled in terms of increasing the knowledge of owner-managers concerning the financial options available to them. 67% of advisers surveyed believed that owner-managers have a ‘poor understanding’ of the range of business finance alternatives available.


The most important step you can take as a business owner is to take charge of the issue of finding working capital for yourself. This can be split into two broad areas – internal resources and external sources of finance. Firstly, take a long hard look at your invoicing and collection procedures: get close to your customer, make your credit terms crystal clear, open new accounts properly and issue effective invoices rapidly. Confront collections issues swiftly and decisively.

Secondly, ask your suppliers for help. A commitment by you to prompt payment can be a powerful aid to better buying. Thirdly, look at how you can make savings internally. Involve the whole team and come up with a plan, backed up with a cashflow forecast.   Then look at external sources of finance. These range from family and friends to invoice discounting (actively recommended by 98% of advisers surveyed), asset finance, factoring and asset based lending. Business angels, crowd funding and government grants also have a role to play.

Readers of Growing Business can access The Guerrilla Guide to Working Capital, written in partnership with Professor Nick Wilson. This practical independent guide clearly sets out the alternatives available to your business, helping you to thrive, not just survive. You can download The Guerrilla Guide To Finding Working Capital’ free from www.smeif.com.

John Wilde is the sales & marketing director at SME Invoice Finance Limited, a privately owned and fiercely independent specialist invoice finance company, providing circa £60million of funding to clients nationwide. It claims to work closely with clients to understand their objectives in order to create an invoice finance solution tailored to meet their needs. For more information visit  www.smeif.com .


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