There’s no doubt that business confidence has slumped of late, as the UK economy continues to hover on the brink of a recession.
According to the S&P Global/CIPS UK Composite PMI (which held steady at 53.1 in June), the UK is gripped by an unchanged rate of growth that’s at its lowest since the coronavirus lockdown of February 2021.
Because of this, your business may require some form of funding to consolidate its current position (or even expand tentatively if it’s actually doing quite well). However, bank loans remain relatively inaccessible, so what alternative funding methods exist in 2022?
#1. Peer-to-Peer Investing
Peer-to-peer lending platforms first emerged in the wake of the 2008 financial crisis, as innovation and social shifts combined to create a solution for both personal and business borrowing.
Such platforms enable applicants to borrow capital freely from interested investors, simply by stating their requirements for funding (both in terms of purpose and how much they want to borrow) and allowing interested parties to commit cash.
Of course, firms will still need to present stable earnings and viable credit history to attract the best lenders, but this type of lending is far more accessible than borrowing cash from a bank or institutional lender.
#2. Cash Flow or Invoice Financing
Ultimately, a lack of cash flow or inability to manage working capital is central reasons why many small businesses fail, which is why invoice financing, factoring or similar options provide a viable source of funding.
Invoice or cash flow financing refers to a way of borrowing money based on what your customers owe to your business, usually in the form of raised invoices. With factoring, you’ll sell your firm’s accounts receivable to a third-party lender (usually at a slight discount), enabling you to cope with 60 or 90-day invoice terms.
These flexible and short-term lending options are highly desirable to new businesses, while they’re typically accessible to any firm that has started trading.
#3. Asset Based Lending
Finally, we come to so-called “asset-based” lending, which is a secured type of borrowing that utilizes your business’s core assets and equipment as collateral.
The amount that you’re able to borrow varies depending on the value of viable assets on your balance sheet, while everything from equipment and commercial vehicles and your company’s premises can be used to secure funding (depending on the individual lender in question).
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As a secured type of borrowing, you’ll usually be able to access capital at a much lower rate of interest, as lenders won’t need to offset any additional risk associated with you failing to repay your debt.