Finance Options for Small Businesses and Start-ups

Depending on the products or services your company offers and the associated production costs, having access to a little bit of cash can make all the difference when you want to create more lines, reach new markets or expand to meet demand. Start-up businesses often face barriers to accessing finance because there is no proof that the model will work and a potential lack of success is a risk big banks might not be willing to take. If your small business loan has been rejected, the bank is legally obligated to refer you to an alternative provider but it is important to understand the reason why you weren’t successful to see if the issue can be addressed.


Alternative Lenders

Independent or alternative financing is often more specialised and so there are a wider number of products to choose from, such as VAT loans, equipment loans and franchise loans. As with any form of purchase it is worth shopping around for lower interest rates but be sure of what you are signing up to; it may be secured or unsecured and there may or may not be flexible repayment terms or overpayment penalties. It is also possible to borrow against your company’s assets but we would advise you speak to your accountant prior to applying for any loan so you can be sure your figures are sound and the lending choice will not damage your business. If you are looking to appoint an accountancy firm to assist you with the right financing option, please call us to arrange a free new client consultation.

Peer-to-peer Lending

Individuals and businesses can borrow money via this method, regulated by the Financial Conduct Authority (FCA), which operates very much like a regular bank loan but often interest rates are more favourable. Funding Circle, Folk 2 Folk and Lendinvest are examples in the UK. Each funder has a minimum capital amount set aside and this is available to as many or as few people as they wish to fund, for any amount requested. Those wishing to borrow have to specify how much they would like and for how long, and they are matched to suitable investors to choose from.

Individuals and businesses can borrow money via peer-to-peer lending, which is regulated by the Financial Conduct Authority (FCA).



This financing method is a sound measure of the market and potentially a more reliable marker of future business success than the thoughts of sector leaders, so you and your ‘amazing’ idea can get a harsh reality check. In some ways, crowdfunding is a natural progression from the group validation which social media brings. The financing method allows for ‘positive feedback loops’ in a similar way social networks do; the start-up receives instant feedback and funds and the funders enjoy the emotional journey that engagement tactics can generate. Momentum can easily build from a small team of passionate advocates, but often you require excellent marketing skills, and ironically funds, to obtain interest in the first place. One option is looking at design, marketing and PR service providers who offer underwriting solutions, whereby they provide support when the business needs it the most in the crowdfunding period and cover the costs.

Bridging Loans

This form of short-term financing has exploded during the current decade, growing from £1 billion in 2011 to £7 million last year. These loans are predominantly used by those looking to buy a property on a tight deadline and don’t need the money for very long, for example to make a purchase while waiting for a sale. Property development companies often opt for bridge finance as monies can be accessible within a couple of weeks, which allows refurbishments to go ahead quickly. If you have equity in an existing mortgage or bridging loan, you utilise this money for your business, whatever its focus. It would be remiss if we didn’t highlight that bridging loans are secured against the value of a property and you run the risk of repossession if repayments aren’t made on time.

Bridging loans and merchant cash advances are a finance option for those wanting to undertake improvement work, and pay back once another property is sold or when seasonal custom returns.


Merchant Cash Advances

This funding option is aimed at established businesses and it particularly suits seasonal firms or services, but it can be a sensible option for some fast-growth start-ups. The quiet season provides the opportunity to make improvements, purchases or other changes, but this is when cash flow is usually a problem. The amount you are able to borrow on a MCA is linked to the average amount that you usually take in card payments, there are no restrictions on what the funding can be spent on and then repayments (the total is agreed in advance) are made as a percentage of the future debit and credit card sales. Essentially, until you have money coming in you don’t pay the money back, but the repayment amount increases along with any increase in sales.

Whether you are looking for a reputable accountancy firm to prepare your accounts for a loan application or require business advice for any aspect of your start-up or SME, please contact us to arrange a consultation. While we are based in Tamworth, we service businesses and individuals nationally and offer cloud accountancy software for effortless bookkeeping.