Cashflow is an ongoing concern for small businesses, who often have to deal with reluctant lenders and mountains of paperwork. Which is why more and more are turning to fast funding and loans.
As to why small businesses are being turned down for loans, 31 per cent said it was because their business was too young, they had high levels of existing debt (22 per cent) and insufficient collateral (20 per cent). The research, from Yolt, also revealed that only one in five businesses felt the borrowing process was easy.
However, there may be a fast business funding option that is better for you, which we’ll be exploring in this article.
>See also: Small business finance – the complete guide
What type(s) of funding can I get?
Les Roberts, content manager at Bionic, said: “Typically, a business loan can range from as little as £1,000 up to several million. Repayment terms can vary from one month to 15 years, depending on the type of loan and the lender. Business loan rates in the UK will also vary, depending on a number of factors – from the length and size of the loan to your business’s financial position.”
With this kind of funding, you’re generally looking at secured loans (which requires something that you own as collateral), unsecured loans (a loan which doesn’t involve any kind of collateral) and merchant cash advances (where you repay your loan as a percentage of future sales).
Jump to your preferred section or read on for the full guide.
- What can I use funding for?
- What happens if I can’t repay my loan?
- Will I need a business bank account?
- Risks of fast business funding
- The best fast funding providers in the UK
- I’m still not sure if fast business funding is for me
What can I use funding for?
Each provider may have stipulations, but you can really use your loan for anything. This could include:
- Improving cashflow
- Buying equipment/stock
- Take advantage of a one-off buying opportunity
- Clear debt
- Pay suppliers
The British Business Bank said that the main reason SMEs is to support their business working capital or cashflow.
“Fast finance is generally better used when you need to raise funds quickly, such as to bridge short-term cashflow issues, or to take advantage of an opportunity that might have arisen, such as buying some stock in bulk at a discount,” said Stuart Airey, head of corporate finance at Accounts and Legal. “It’s not totally suited to longer-term borrowing, although it can be used that way if other options aren’t available.”
>See also: Alternative business funding for small businesses
What happens if I can’t repay my loan?
If you can’t repay, then fees will likely be added and/or the interest rate will be increased.
Will I need a business bank account?
If you’re a sole trader, you may be able to get away with a personal bank account but otherwise, you’ll need a business bank account. This can also depend on your credit score. In general, you’re better off having a business bank account, even if you’re a sole trader. Read more at 5 benefits of using a business bank account over a personal account.
>See also: Small business startup funding
Risks of fast business funding
As mentioned before, proving your viability as a business can prove restrictive. “The biggest struggle is actually being able to borrow money,” said Airey. “Unless you’ve got a couple of years profitable trading history and are willing to offer a personal guarantee, a lot of lenders won’t consider them an investible business. This makes it really difficult for brand new businesses to secure any financing.”
CEO and founder of Unbiased, Karen Barrett, told Small Business: “For small businesses in need an immediate cash injection, short-term loans can offer a ready-made solution – applications are processed much faster than traditional loans, often accepted within 24 hours. But be warned. The less stringent underwriting process means they often attract higher interest rates, as well as heavy penalties for those who fail to repay on time. For this reason, it would be wise to seek professional advice before signing on the bottom line.”
You can mitigate this by asking the right questions. Airey said that you should be asking:
- What other options are available?
- Whether trying to raise equity funding might be a better option
He added that businesses need to be asking themselves how they’re going to repay the finance and ensure they consider the future cashflow of the business will be sufficient to meet future repayments.
“Often small businesses don’t shop around when it comes to finance, and the majority take the first offer they receive, which might not be the best product available to them,” said Airey. “Fast funding is generally easier to apply for, but applying with multiple lenders can take time, as their document requests can vary.”
One concern you might have is protecting your credit score. Most firms will run with a soft credit check, so it won’t affect your credit rating. Be sure to check before you apply, though.
The best fast funding providers in the UK
As Airey says, finding the right provider can make a real difference, so here are a few UK-based providers to kick off your search. Note that most of them will have some kind of eligibility criteria in terms of how long you’ve been trading and/or your minimum turnover.
Cashsolv
Loan limit: £20,000-£250,000
Repayment term: 1-12 months
Type of finance: Unsecured loans
Time taken for approval: Money will reach your bank within 24 hours
Can I repay early? No
Cashsolv instant loans are specifically designed for emergencies but there’s no guidance outlining how you should spend it.
You have the option of either repaying in one lump sum at the end of the loan term or to repay in monthly instalments.
Cashsolv asks for “reasonably up-to-date” accounts before they give you a loan. You’ll also have to be able to declare how you intend to make repayments along with supporting documents. Cashsolv will be doing ID checks to keep itself in-line with money laundering regulations and you’ll be required to provide a proof of address.
As this is a short-term loan, early repayments won’t be accepted.
Loan limit: £10,000 – £500,000
Repayment term: Six months – three years
Type of finance: Secured and unsecured loans
Time taken for approval: Same-day approval
Can I repay early? Yes
Century Business Finance promises a two-minute application process and low rates.
There are a few different financing options available: cashflow loans, unsecured business loans, same-day business loans, VAT & tax business loans and fast business loans. Once approved, the money will be in your bank account on the same day. Note that a financial services intermediary fee will be taken out of your account within seven days of receiving the funding.
You must have been trading for at least six months and a turnover of £72,000 per year.
Century Business Finance will allow you to repay early on loans from £10,000.
Loan limit: £1,000-£500,000
Repayment term: From one day to two years
Type of finance: Unsecured
Time taken for approval: Within one working day
Can I repay early? Yes
Iwoca can give loans to all businesses, no matter the age or sector. It’s open to sole traders, partnerships and limited companies. It also has a two-minute eligibility check – and the whole application process takes five minutes.
Accounts come with an account manager.
If you go for a flexi-loan (repayment up to 24 months) then there are no extra fees and charges. If you go for a business loan, there will be a 6 per cent funding charge spread out over the first few repayments.
You’ll need bank statements from the past year in order to apply (or you can link your account via Open Banking). The other documents required will vary based on the type and size of loan, but could include VAT returns or company accounts.
Loan rates start at 2 per cent and there are no fees for repaying early.
With the flexi-loan option, you can apply for a top-up once you’ve paid back a third of your original credit limit. Updated information about your business will be required at the time of topping up.
Loan limit: £5,000 to £750,000
Repayment term: Repay weekly
Type of finance: Secured business loans and merchant cash advance
Time taken for approval: Receive your provisional decision within 60 seconds
Can I repay early? Yes
Capify will take a small percentage from your business bank account each day rather than a lump sum.
Merchants will typically receive up to 130 per cent of monthly their gross sales. You must have been in business for at least 12 months with minimum gross sales of £10,000 a month and no open bankruptcies.
To apply, you must have six months’ worth of bank statements, a copy of a void check and a photo ID.
For the merchant cash advance, you need to take at least £6,000 a month in card payments and have six months of trading history.
Your application will need to be filled out by 51 per cent or more of your business ownership, you also need four months of recent credit/debit card processing statements and your most recent monthly bank statement.
Loan limit: £10,000 – £400,000
Repayment term: Dependent on debit and credit card payments
Type of finance: Merchant cash advance
Time taken for approval: Within 24 hours
Can I repay early? N/A
365 Business Finance has no fixed monthly payments. Instead, you pay back a percentage of your debit and credit card sales. This means that when your sales are up, you’ll be able to pay more of your loan balance and when sales are low, you pay less.
To be eligible, you must have been trading for at least 12 months and have an average monthly credit and debit card turnover of £10,000.
Loan limit: Up to £250,000
Repayment term: Up to five years
Type of finance: Unsecured loan
Time taken for approval: Minimum four hours
Can I repay early? Yes
Love Finance offers a completely automated service with interest rates as low as 2.9 per cent. Funds in as little as four hours. However, you can speak to someone on the phone if there is an issue.
Must have been trading for a minimum of three months and have a £35,000 minimum annual turnover.
You can repay early without penalty.
Momenta Finance (trading name of Merchant Money Ltd.)
Loan limit: Up to 750,000 secured and up to £250,000 unsecured.
Repayment term: Six months to five years
Type of finance: Unsecured loans, business cash advance
Time taken for approval: 24-hour approval
Can I repay early? Yes
Merchant Money is a member of the Federation of Small Business (FSB) and a patron of the National Association of Commercial Finance Brokers (NACFB).
You have the choice of financing through a loan or through a merchant cash advance. To apply, you must ensure that your current debt obligations are “affordable”. You must have a minimum of one year’s accounts or six months trading time with a card terminal for a cash advance. You’ll have a minimum annual turnover of £100,000, or £5,000 per month for a cash advance.
Loan Limit: £5,000-£500,000
Repayment term: 12-48 months on Flexiloan; 3-12 months on Flexiloan Lite
Type of finance: Unsecured or secured loans
Time taken for approval: Within 24 hours
Can I repay early? Yes
Fleximize offers both secured and unsecured lending options for both of its loans.
Flexiloan is available for businesses that have been trading for 12+ months. It’s good for those who want flexible, affordable finance for up to four years. It has terms of 12-48 months.
Flexiloan Lite is geared at businesses trading 6+ months, with terms of 3-12 months. It’s best for businesses in early-stage growth phase who need quick access to capital, though more established businesses can also use it as a business loan.
You can apply if you’re a limited company or limited liability partnership with at least four partners, are UK-based with one director living in the UK, you’ve been trading for at least six months and you have a minimum monthly turnover of at least £5,000.
If you’re a sole trader or a non-limited partnership with fewer than four partners, you can apply if you want more than £25,000.
Loan limit: £10,000-£500,000
Repayment term: Two to six years
Type of finance: Unsecured loans
Time take for approval: Typically within 24 hours but can be as little as five.
Can I repay early? Yes
Interest rates starting at 6.9 per cent per year with Funding Circle.
You must have a minimum two years of trading history to get finance with Funding Circle. To apply, you may also need business bank statements for up to eight months and your latest full unabbreviated accounts – profit and loss, detailed profit and loss, balance sheet information.
There are no fees for early repayment.
I’m still not sure if fast business funding is for me
Before you decide on fast business funding, read over some other options, as linked below:
Borrowing money to pay for stock: inventory finance, credit cards, loans and more
Best small business loans in the UK
The benefits of invoice finance
How to choose the right finance option for your SME
Further reading
Raising start-up capital – who to turn to? – Being a founder can be a lonely business, especially when raising money for your start-up. Don’t worry, help is at hand. These advisors will either invest, help you crowdfund or put you in the best possible place for seed funding
