Business Loans and Small Business Funding
Ensuring the smooth running of your small business is no small task, and achieving growth is one step further. Key to both of these is of course having funding in place - both enough funding to help you achieve your goals, and the right product for the way you operate. Here at Hitachi Capital Invoice Finance, we’re experts in this field, so we’ve put together this guide to help you realise your ambitions.
SME cash flow is naturally lower than that of large businesses, which immediately puts you at a disadvantage. With less cash comes finer margins for error, so you need your funding options to be cost-effective, fast and efficient.
In addition, as a smaller enterprise, you’re less likely to have valuable assets that can be used as collateral or even sold off. You might also be newer to the market, with less credit history. Bear these challenges in mind when considering funding options - finance for small businesses isn’t always as easy to come by through traditional means.
You cannot decide upon a funding option without first knowing what you want to achieve. Are you looking to purchase assets? Do you need investment to take that next step and grow the business? Are you looking to resolve cash flow difficulties?
Once you’ve identified the purpose of the small business funding you’re looking for, you’ll be better able to decide which product is right for you.
Loans and Overdrafts
A business loan is of course going to be the first business funding option that comes to mind. It’s a straightforward option with which you’ll no doubt be familiar. The prime benefit is that you can easily budget for repayments as they’re the same over time, and you can tie them in with the lifespan of assets. Drawbacks include lack of flexibility - you may not be able to reduce payments in the event of financial difficulties, or raise them without a fee if you’re looking to pay off early. Loans for SMEs aren’t always easy to come by either, especially if you’re not a long-established business.
Overdrafts on business accounts, along with small business credit accounts can also be useful, as unlike loans they can be paid back as an when you need. They may be a more expensive option however.
Alternative Online Lending
Peer-to-peer lending has become a popular funding option and is generally done online. The goal is to match those who wish to lend and invest with those who require funding. General flexibility is one of the major benefits, but be aware that there are fees to pay both the lender and the intermediary.
Crowdsourcing is another avenue for you to pursue, whereby you’d look to source funding from a wide number of public backers. Again, this is usually done online, and is a very popular way of getting interesting ideas off the ground.
If your aims are primarily concerning cash flow, then there are few better options for you to consider than invoice finance. In short, this solution is designed to free up the funds that are tied up in invoices that haven’t yet been paid by customers. There are two products offered by providers such as ourselves: invoice factoring and invoice discounting.
The major difference between the two is that discounting is confidential, with credit control maintained by your business as usual, where factoring is made clear to your customers, and the finance provider looks after credit control. SME invoice discounting is great if you’ve already built up relationships with customers, and small business factoring can be useful if you’d like someone else to take charge of chasing payments.
Get in touch
For an informal discussion in regards to your cash flow needs please contact us on
0808 256 6442