Small Business Finance UK: A Practical Guide to Funding Business Growth

Operating a small business normally involves having to reconcile plans of rapid growth with financial constraints. Whether dealing with payroll issues, supplier payments, buying equipment, expanding office space, or exploring new avenues, having proper sources of finance is always a helpful tool. Selecting appropriate finance is not about acquiring finance only; it is about choosing a solution that will fit the company’s goals, cash flow, and capacity to repay the funds.

When companies consider small business finance UK as a financing method, knowing more about the available options is the first step to take. Since various sources of finance serve various purposes, comparing them according to those and other aspects may prove useful for businesses.

Why Do Small Businesses Need Business Finance?

Even profitable businesses can go through phases where money gets tied up or more money needs to be made available. It takes customers weeks to clear their bills while salaries, rent, stock and suppliers’ payments have to be settled.

Finance can assist businesses not only in managing these phases but even in planning further ahead. Some of the reasons for which finance is sought include:

• Handling cash flow problems
• Purchasing machinery, cars or IT
• Extending the operation or renting new premises
• Increasing stock or working capital
• Financing marketing and business development
• Handling unanticipated operational costs
• Making a business purchase or expansion

Proper finance should help the business and not put additional financial strain on it. That is why it is important to know the reason for borrowing money before going to the bank.

How to Choose the Right Finance

The choice of finance must start with the business need and not with the amount of money one can get from a loan. Determine the exact amount and the purpose of the funds.

Then look at the projected return on the investment. In case the business requires finance to buy equipment, to increase capacity or rent new premises, try to determine how the investment can generate income in future.

Entrepreneurs must also think about:

• Interest and total borrowing cost
• Arrangement or administration fees
• Repayment schedule and period
• Conditions for early repayment
• Collateral or personal guarantees
• Fixed and floating rate
• Impact of the repayment on monthly cashflow

The comparison of these items may help entrepreneurs to avoid selection of finance by only looking at the interest rate.

What Lenders May Look At

On evaluating the application, lenders have many options when choosing what to base their decisions on, including the trading history, turnover, profitability, liabilities, banking details, credit history, and the reason why the requested funding is needed.

In the case of property borrowing, it is possible that the value and features of the property will play an important role in the evaluation of the application. The asset which is to be financed can be used in the evaluation of the loan application.

It will make the application easier if accurate financial information and the use of the funds were described clearly.

Making Finance Part of a Growth Strategy

Finance operates effectively only as an integral component of an overall business strategy. Lending is supposed to have a specific objective and a feasible means of repayment instead of being used as a stop-gap solution to deal with perpetual financial issues that keep arising without solving their root causes.

For instance, a business undergoing occasional cash flow problems will be better served by working capital or invoice financing, while a business that is putting up new equipment would be advised to use asset financing. A business seeking to acquire property will require commercial property finance.

Small business finance UK becomes a useful strategy for cash flow management and investments in assets.

Why Specialist Finance Support Can Help

The lending industry in the UK comprises of both mainstream and niche lending products, making it hard for business owners to tell which products are worth looking into. In such cases, a finance broker may prove useful in assessing the need, and getting acquainted with the circumstances of the business to determine the right lenders.

Corporate Finances offer funding solutions in business loans, asset financing, and invoice financing, among others, in addition to specialist property lending solutions. Corporate Finances claims to have partnered with over 300 lending firms, providing access to over 4,000 lending products.

Professional advice may, therefore, prove very useful especially when dealing with businesses with special circumstances and funding needs.

Final Thoughts

Small business finance UK need not mean taking up the first finance product option at hand. Instead, the correct thing to do would be knowing what the finance should accomplish, how affordable it is, and the total cost of the finance product and selecting one that can help achieve other goals of the business.

Regardless of whether it’s for improving cash flow, acquiring assets, expanding the business or even renting out commercial properties, a good finance product can give more freedom to the business while enabling it move towards its next phase of success.

Need assistance with finance products that meet the needs of your business? Contact Corporate Finances and talk about your finance needs.

FAQs

1. What is small business finance?

Finance for helping the business manage its cashflow, buying assets, paying costs, or expanding.

2. What are some examples of business finance options?

Business finance options may include business loans, asset finance, invoice finance and property finance.

3. Can new businesses secure finance?

New businesses can secure finance, depending on the lender, business plan, financials, and other criteria.

4. Do I need to use a finance broker?

Finance brokers can help determine which finance option may suit the business.