For one and a half years, the UK’s economy has been hanging on a thread with most British businesses depending on government support. But it’s high time UK SMBs started fending for themselves.
Though the COVID period was tough for UK businesses, the economy has been recouping, though slowly, amid scary reports that up to £5 billion of disbursed Covid funding may never be paid back. This means the government won’t give out more loans and traditional banks will be less willing to lend to startups in a tricky economy.
So where do microbusinesses run when public reserves run dry? They go to Alternative Lenders.
Yes, savvy microbusinesses can still bridge these money gaps by tapping into alternative sources of funding, until the economy stabilizes and the lending environment gets better.
Using Alternative Funding to Support Your Business
Alternative lending is, roughly, any loan that is not a traditional loan. Though the conventional bank business loan is the most popular funding product among UK small businesses, entrepreneurs who don’t qualify should look further.
Here are some sources to consider:
Business credit line
A credit line is an arrangement that lets you borrow money. A credit line for a small business is a lot like a credit card. You promise to pay back the money you’ve borrowed, plus interest, plus some extra fees. (The extra fees are usually called “interest charges.”) You can borrow up to a certain limit, and you can use the money any way you want.
Invoice financing works like this: the bank will give the small business an advance against its incoming invoices. It pays the bank in installments against the business’s invoices.
Merchant cash advance
A merchant cash advance is an advance against your future credit card and debit card sales. Instead of a lump sum, you usually receive monthly payments based on a percentage of your outstanding sales.
Though alternative lenders are more willing to lend to small businesses, some bad players can take advantage of a merchant’s ignorance. Loan documents are legal documents, and like all legal documents, they have a way of making themselves incomprehensible. The inability to understand the terms of the loan is one reason many people get stuck with loans they can’t pay off.
Michael Hollis is a Detroit native who has helped hundreds of business owners with their Business Loan solutions. He’s experimented with various occupations: computer programming, dog-training, accounting… But his favorite is the one he’s now doing — providing business funding for hard-working business owners across the country.