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SME Financing

Where should SMEs be looking for finance? While you might think the banks are the first port of call, this isn’t necessarily the case. There are many more options out there, including invoice finance and asset based lending options, which could be more suitable, easier to access and more flexible for your company. So, how can your business find the best possible option?

SMEs are defined as businesses with fewer than 250 employees – there are over 4.6 million SMEs in the UK, generating 99.8% of all business and in turn 47% of the business turnover. As it’s clear to see, SMEs are the lifeblood of the economy, so it’s important that there are enough funding options out there.

Traditionally, loans and overdrafts have been the most favoured options. However, now we’re seeing the banks continuing with only limited lending to small and medium businesses, despite various government schemes looking to get the financing flowing once more. Around a third of all loan applications and a fifth of all overdraft applications are being rejected, so looking to alternative finance is becoming a more popular option.

Opting for invoice finance through an independent lender can free your business from the extensive application process for a loan as well as offering a far more accessible option. Factoring lenders have a great ability to lend to small businesses who might otherwise be turned down; for example, even start ups can be eligible for factoring, even without a long credit history of sales.

Factoring also targets problems endemic to small business, namely cash flow and late payment problems. You can release up to 90% of the value of an invoice to get the funds within 24 hours, rather than waiting weeks or months for payment, or for that loan to be approved.

With so many SMEs in the UK, it’s important that there are funding options out there that are suitable. Invoice finance is one option that could help many small businesses.

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