Having good access to finance can be the key to survival for many small businesses. However, banks have long offered little but lip service to small and medium-sized businesses (SMEs), preferring instead to lend to large firms that have little need for it other than to opportunistically increase their market share.
This SME funding gap has resulted in the emergence of alternative lenders that see the potential in innovative and resilient small businesses. But what are the financial needs of small businesses, and where does this funding go?
No matter how effective a company’s business model, it could be doomed to failure if it doesn’t maintain sufficient cash flow. Indeed, poor cash flow has been shown to account for 80-90 per cent of all business failures in the UK.
Alternative finance can offer small businesses freedom and choice, whether they are seeking longer-term investment to fuel growth or short-term fixes to manage cash flow. With some alternative business loan providers approving a loan in just 48 hours, and others able to deposit funding the same day, alternative providers can offer greater flexibility, while matching the unique needs of individual businesses.
This can prove to be a lifesaver for businesses whose cash flow is routinely affected by late payments or the challenging payment terms of larger companies.
As your business grows, it might need to invest in new machinery, additional staff, supplies and perhaps new or additional premises. Whilst business expansion should always be cautionary rather than cavalier, a small business loan can provide the finance needed for a company to take its next big step. Launching a high-street business, for example, is undoubtedly exciting, but even if you have the right idea, opening your first shop can be a costly endeavour. Rent, equipment, insurance and advertising are just a few of the costs you will need to consider.
An injection of capital can fund the recruitment of additional employees to accommodate growth. With 96 per cent of businesses in the UK employing fewer than nine members of staff, the ability to invest in a skilled and efficient workforce can give a company a much-needed skills boost and distinguish it from competitors.
Investment in staff training is another worthwhile, but expensive, endeavour. Most employees don’t just want a job, they want somewhere they can stay, develop, learn and grow. Supporting employees in their career development can reduce staff turnover by reinforcing a commitment to long-term working relationships and staff progression.
If you have established a retail business online, a physical presence is always going to be at the forefront of your expansion plans. However, this can be costly, and with many retailers having fluctuating seasonal sales, it’s important to find a funding solution that caters for this.
Big Clothing 4 U, a plus-size clothing retailer, had already reached a global audience before it applied for a small business loan with Fleximize. With shops on both eBay and Amazon, the company’s founder Ben Pearson wanted to expand his business by creating a customer showroom and acquiring more stock in preparation for summer.
With the funding from Fleximize in the bank, Ben was able to free up the necessary cash to finish, and fill, his showroom.
If you want to stay ahead of the curve, and your competition, regular machinery upgrades will be essential. However, new parts don’t come cheap, which is why many companies take out business loans to cover the cost of upgrades.
After securing a partnership with an international photography company, Norwich-based printing firm 2M Print turned to Fleximize, as it needed to replace small parts in one of its machines. Approaching an alternative lender proved more fruitful for 2M Print than applying with a bank, with the company’s founder Mark Hipperson keen to secure a fast and flexible funding solution.
Peter Tuvey is co-founder and managing partner of Fleximize.
Further reading on a small business loan
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