07 – SME FUNDING – CHANGE
Henry Audley-Charles talks about ‘Change’
Change can be an unsettling time for businesses. It can present a variety of challenges, as well as opportunities. During these times, it can be easy for business owners to become distracted and take their eyes off their cash flow.
One of the reasons that businesses can fail is lack of cash flow. There are many different funding options for a business to consider from hundreds of different lenders, including overdrafts, loans, invoice finance – all with different terms, fees and options.
Your bank should always be the first port of call for finance as they will be the cheapest option, aside from friends/family. They are the most risk adverse lenders and can take a few weeks to process a request to borrow money. ‘Fintech’ or alternative lenders can provide loans within 24 hours, but this will be at a higher cost. Some lenders have hybrid overdraft/invoice finance products that give the business invoice finance style funding without the admin burden or customer interaction.
Existing assets (vehicles, plant and machinery) can usually be refinanced to release cash – even vehicles over 10 years old. Retailers can borrow against the future takings from their card machine – this is a very fast source of cash, but is expensive when compared to other options.
If a director has frozen company pensions, then these could be used to release cash into the business. This carries additional risks, but can be a tax efficient way of supporting a business. Also if a business owner has sufficient equity in their residential or investment property, then secured loans can be arranged at sensible interest rates*.
All credit will be subject to application and approval by the lender, the interest rate and fees will usually reflect the perceived risk of the transaction.
Grants may be available, which don’t need to be repaid – but these are not quick fixes. Some grants require the client to match the funding provided, others are just straight gifts of money for specific purposes.
Henry Audley-Charles, SME Funding Limited – firstname.lastname@example.org