What small businesses can do when purse strings are tightened

Your Ready Business speaks to Conrad Ford, Chief Executive of Funding Options, recently described by the Telegraph as “the matchmaking website for small businesses and lenders” about alternative funding options for your business.

New research from business finance finder Funding Options has shown that 55% of businesses in the North of the UK have had their overdraft limits reduced. Across the country 30% of SMEs have experienced the same overdraft reductions.

To put this into scale, business overdrafts are being shut down at a rate of £5m per day as banks look to reduce the risks of their balance sheets. 17% of businesses have had their overdraft taken away entirely, and 30% have had theirs reduced in some way.

Banks’ appetite for lending to small businesses is growing, but is it growing at a rate that can support the growing SME market in the UK? Over the past 5 years it is estimated that £2.9bn in revenue has been lost, due to small businesses not being able to access funding.

This signifies that banks are no longer the go-to solution if you are a small to medium sized business looking for finance. So what are your options?

Alternative finance have seen this as a window of opportunity and new companies are appearing every month offering small businesses access to much needed finance which can help them get set up for success and start to grow their business. Here are 5 innovative options that are aiming to give small businesses a boost:

Alternative Overdrafts

Growth Street are leading the way by shaking up the concept of the traditional overdraft. They look at your trading history, the nature of your business amongst other things, and work with you to come up with a suitable overdraft limit.

Revenue Loans

If you have fluctuating cash flow, and fixed loan repayments wouldn’t suit your business model, then revenue loans could be perfect for you. You’ll agree up front with the lender, such as Fleximise, what percentage of your revenue you’d like to use to repay the loan.

Ecommerce Loans

These loans are designed for online sellers that make use of sites like eBay. Lenders like Kabbage can connect to your eBay account, take a look at your seller’s history and let you know what they could lend you. The process takes minutes to complete.

Import Finance

If you regularly import goods from overseas, services like Trade River could be for you. You apply online to Trade River and agree credit terms. You then place an order; Trade River will directly pay the seller, in their preferred currency on shipment.

Merchant Cash Advance

If your business gets its revenue using point-of-sale and card services like Stripe and iZettle then the merchant cash advance could be for you. The lender will look at these services and predict your future cash flow.

Overall, there are many options available to you if your usual line of funding is cut, or if you’re simply not satisfied with your bank’s current service. The clear consensus is that alternative finance can take in much of the slack left by the decline of bank lending to SMEs.

With the free Funding Options service, you can quickly search dozens of alternative business finance providers.