According to recent research by Xero, 72% of SME owners have experienced cash flow issues in the last 12 months. 41% have skipped paying their own salaries because funds are tight. And 50% are worried about their financial futures. Sound familiar?
You’re certainly not alone in stressing about how you’re going to keep the lights on when late payments have left you high and dry, but that doesn’t make life any easier when you need to pay your staff and have HMRC breathing down your neck.
Stress, anxiety and insomnia are the unwanted side-effects of running a business for many of the UK’s entrepreneurs. It can be hard to know where to turn when things get tough, especially if your bank has already given you the cold shoulder.
Again, you’re not alone here. New figures from British Business Bank confirm lending to small businesses is declining, with a 12% drop in real terms in 2023 thanks to higher borrowing costs and growing economic uncertainty. Translation – there’s less cash available, and small businesses are the ones feeling the pinch.
While it might be a natural first port of call, your high street bank isn’t the only option when your business needs an injection of funds fast. Even if your bank says yes, they might not be the best option due to stringent requirements, lengthy credit checks and repayment terms that could make you shed a tear.
There are several alternative funding sources to consider to get you back on an even keel. Let’s dive in.
Angel investment
If you’re happy to give up a small stake in your business, angel investment could be a potential funding source.
An angel investor is someone who’ll inject cash into your SME and expect to take a percentage ownership in return. This will often be a relatively small amount, such as 10- 25%, but will vary from agreement to agreement. Depending on the investor, they may also take on a direct role in the business to ensure its success. This means they’ll work side-by-side with you and give you the benefit of their experience.
Pros
- You’ll get the cash injection you need for your business
- You’ll get support from the investor with their time and expertise poured into your business
Cons
- You’ll have to give up a stake in your business in exchange for the cash
- You’ll no longer be the sole decision-maker
- You may not get along with your angel investor
Asset finance
Do you need a new vehicle, equipment, or machinery to boost your business? Asset finance could be a viable alternative if you don’t have the right tools to get the job done, and you can’t get a loan from the bank. This gives you the funds to buy the vital equipment you need with fixed monthly payments rather than a significant upfront cost that could decimate your cashflow. It’s like a loan or lease for acquiring assets like machinery or vehicles.
Pros
- You won’t need to use all your funds to acquire the required vehicle or machinery
- You can make manageable monthly payments
Cons
- It can be a more expensive way of purchasing the asset
- If you aren’t able to stay on top of repayments, the asset could be repossessed, affecting your ability to operate your business
Crowdfunding
Crowdfunding could be worth exploring if you’re looking for an alternative funding option. This sees you raising small amounts of investment from a larger pool of people. Many entrepreneurs have successfully gone down this route. It’s not usually suitable for covering operating expenses but it is helpful if you have a new product to bring to market.
Pros
- It can be a fast way of bringing in investment for a new project
- It’s a good way to test the market and determine if there’s interest in your idea or concept
- You can use your crowdfunding campaign to build up your pre-sales pipeline
Cons
- Funding isn’t guaranteed, and if you miss your target, you may not get any money at all
- Competition is intense so you’ll need to invest heavily in marketing your project to attract attention and secure backers
- You’ll usually have to hand over a percentage of what you raise to the crowdfunding platform
Peer-to-peer lending
Peer-to-peer lending is another popular alternative investment option. It works on a marketplace model, with lenders matched with borrowers, typically via a lending platform or a broker service. You’ll need to provide details about your business and what the money will be used for, and then wait to see if you’re matched with lenders. Think of it like Blind Date but for business finance.
If approved, the funds may be drawn from multiple lenders, with each contributing a certain amount towards your total loan figure. Those lenders may be other businesses but could just as easily be individual investors.
Pros
- It’s a flexible form of investment for businesses seeking loans big or small
- Unlike angel investment, you aren’t required to share control of your business with other people or organisations to access the funding needed
Cons
- You’ll need to provide credit reports, profit and loss reports, bank statements and other business information
- If you have a poor credit rating or are already struggling financially, it may be difficult to get approval
- You may have to pay a fee if you use a peer-to-peer lending platform
Punk Business Loans
If your bank’s given you the cold shoulder, we’ll be your shoulder to cry on. We provide quick and easy access to cash, even if you have a poor credit history or have a stack of unpaid bills littering your desk. We tailor our repayment plans to suit your circumstances and can help if you need more support or want to explore restructuring.
Pros
- No credit checks and no BS
- We can move fast and provide finance in as little as five working days
- Use the cash for whatever you want, whether that’s to settle debts giving you sleepless nights, pay your team, get HMRC off your bank or expand your business with a new location or new equipment
Cons
- None at all
We have flexible funding options, don’t need a credit check or financial forecasts and can act fast to get you out of a bind. Get in touch with us now.
