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Coronavirus eating into SME cash

Over two-thirds of UK SMEs (69%) have reported significant pressures on their cash levels according to latest insights from business lender MarketFinance. This is in large part down to businesses paying for supplies earlier than anticipated because of Coronavirus-related stockpiling and fears of deeper disruptions to transport (road, air and rail) linkages.

Additionally, on orders and work that has been completed, payments are being delayed. Three-quarters (74%) of business owners reported invoices due to be settled at the end of February have not been paid yet (as of 10th March 2020) and that these were unlikely to be settled before the end of March 2020.

Over a third (36%) of business owners feared they won’t survive to Easter (6 weeks) if they were unable to secure some finance to bolster their business. Meanwhile, as economic conditions worsen, and with the possibility of widespread quarantine implemented across parts of the country, businesses will need to have financial and operational contingency plans in place to protect jobs, industry and communities.

Anil Stocker, CEO at MarketFinance, commented: “The impact of the Coronavirus spread is being felt by SMES across the UK as finance and supply chains are disrupted. At the best of times, only around half of these businesses are cashflow positive. Today, businesses are feeling a palpable sense of helplessness and isolation and there is a lack of specific information on how to cope with the crisis.”

“At the moment cash is king and if businesses are being starved of this cash, it will leave them stranded. Whilst policy efforts play out to contain the spread of Coronavirus, business owners should brace themselves for some turbulence and have a prepared mindset for the scenarios ahead.”

“Rishi Sunak has a golden opportunity to prove that he is a champion of UK SMEs. There is a role for government to work with businesses, banks and other lenders to ensure a resilient economy. It will be the smallest businesses that are most hit as they have the least bargaining power in global supply chains. They could, for example, give businesses VAT / tax ‘holidays’ to ensure that they have enough money to cover immediate costs.”

Source: Business Money

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Merchant Cash Advance 101 – Everything UK SMEs Need To Know About Business Cash Advance #1 – Alternative Sources of funding for SMEs

Running a business, of any size and nature, eventually boils down to how well you can handle the numbers. There are, of course, the important calculations about growth and reinvestment, but, as far as the day to day operations are concerned, it’s all about managing the cashflow.

Larger businesses have it slightly easier in this regard. Bigger pockets usually ensure better credit, thereby also implying that such businesses rarely have to borrow in order to look after everyday expenses.

The same, however, cannot be said about an SME. SMEs have a whole different set of questions to answer, and the answer usually lies in how easily, how conveniently, how fast and how affordably they can borrow money. This is where alternative sources of finance come to the fore as many of them have the ability to mould themselves to the exact needs of your business.

Merchant cash advance is among the most popular alternative funding sources for UK SMEs, and we will try to take stock of its features in this article.

What Is Merchant Cash Advance?

Merchant cash advance, also known as business cash advance in many circles, is a fast, unsecured business loan that helps SMEs tackle the cashflow problems. Merchant cash advance is a cash injection that is tied to your future debit and credit card sales. In that sense, merchant cash advance or business cash advance is a good source of alternative funding for B2C SMEs.

Merchant Cash Advance Definition

Merchant cash advance is an unsecured business loan that is repaid through the future debit and credit card sales you make.

Unlike other business loans and overdrafts, there are no fixed monthly repayments to make. There is no APR to worry about either. The equation is fairly simple – the more sales you make, the faster your loan gets repaid. This also means that if you’re experiencing a particularly slow month, your repayments will be proportionately smaller.

Each merchant cash advance account is tied directly to your card terminal (point of sale). So, it’s important that a healthy share of your sales comes through debit/credit card transactions.

Merchant Cash Advance – How It Works

Merchant cash advance is inherently different from other unsecured business loans in that it is based directly on the profitability of your business. Lenders, while assessing the potential of your business, will take a close look at the performance of your business – especially the card terminal transactions. Due to this peculiarity, it becomes important to understand how merchant cash advance really works.

The Process – Take A Moment To Familiarise Yourself With How MCA Works

Merchant cash advance lets you borrow money as and when you need it – but it’s technically not really a loan (we will get down to that part shortly). For now, we suggest you take a moment to understand the process and how it will impact your cashflow.

  1. Any SME that makes card terminal sales can apply for a merchant cash advance. Commercial Finance Network makes this process incredibly easier and faster.
  2. The lenders take a look at the recent history of card based transactions and decide your affordability. This is similar to other forms of credit and loans.
  3. Once the lender determines your affordability, you’re presented with a cash advance offer.
  4. After you accept the quote, the money is transferred directly to your bank account. This process is smooth and involves minimal paperwork. Working with an experienced whole of market broker like Commercial Finance Networks means that you will have the added advantage of speed. You can expect to see the funds in your account in 1-2 business days.
  5. You will start paying the money back to the lender as soon as the repayment period kicks in. The repayments are usually based on your daily business (5-25% of your daily card sales, depending on the offer you’ve agreed to).
  6. There is no conventional interest rate or APR. You’ll essentially be selling a fixed percentage of your future sales to the lender until the advance is fully repaid along with the fees and charges. An upfront interest amount is calculated using the “factor rate”.

Merchant Cash Advance Factor Rate – What It Is & How It Is Calculated

Every MCA quote you will receive will specify a certain “factor rate”. This number essentially replaces the traditional interest rate and tells you everything you need to know about the cost of borrowing.

The factor rate is expressed as a single number that typically ranges between 1.1 and 1.5 (depending on the health of your business and your affordability). For example, if you’re borrowing £10,000 from a lender and the factor rate is 1.1, you will be required to repay £11,000 in total. It’s really as simple as that.

There are a few things to consider here.

The factor rate differs from the APR/interest rate on two counts. Firstly, it is a fixed number that tells you exactly how much you will need to pay. Secondly, it has nothing to do with the balance of the advance that’s unpaid. It doesn’t matter how quickly you pay the MCA off, you will still pay the amount determined by the factor rate.

Merchant Cash Advance Is Not Really A Loan

In the traditional sense of the word, a loan is the amount you borrow and pay back as a function of the interest rate and time. Therefore, it should be easy to see why it’s not a good idea to treat a merchant cash advance as a loan.

As we mentioned earlier, when you borrow money using an MCA, you essentially agree to sell a part of your future revenue to the lender. The lender assumes much less risk here, even though it’s an unsecured mode of credit. We would go so far as to argue that a business cash advance/merchant cash advance is an unsecured counterpart of revenue based alternative sources of funding for SMEs (for example, invoice finance).

How Much Can You Borrow?

Larger businesses usually don’t feel the need to borrow via MCA since they have at their disposal stronger lines of credit from banks and other lenders. SMEs, on the other hand, can borrow enough to tie up the loose ends, get the cashflow in order and access money to fund purchase orders/new business opportunities.

At Commercial Finance Network, we help UK SMEs borrow anywhere between £2,000 and £200,000 as a cash advance from our panel of responsible and specialist lenders.

Please note that the amount you can borrow will depend upon the following factors:

  • The nature of your business and the industry/sector you operate in
  • The average daily turnover (card terminal transactions)
  • The overall profitability of your business

There’s no need to feel overwhelmed by these factors – these are essentially the same factors that lenders will look at while assessing any other loan application.

Please read on to learn more about how we, at Commercial Finance Network, make it easy for you to apply for and get a merchant cash advance from UK-wide lenders.

Merchant Cash Advance – A Short Case Study

Being a leading whole of market commercial finance broker, we get to work with businesses of all sizes. This gives us a unique vantage point regarding the requirements of UK SMEs. The following MCA case study will help our customers and readers understand the practical importance of merchant cash advance as a financing tool.

We recently worked with a London based mobile food startup. Their business model was interesting and had already received a good deal of positive PR in local circles. However, at less than 18 months of age, the business had no history of credit to fall back on, meaning that they couldn’t borrow the money required to grow their business from banks and high street lenders. To receive more funding from investors they already had on board, they had to hit a monthly sales target – a target they couldn’t possibly reach without investing in a new point of sale (a financing catch 22 situation). This meant that they needed at least £20,000 to buy a new van and hire 2 more employees.

After understanding their unique situation, we forwarded their application to a specialist MCA lender who agreed to assess their business.

The following terms were drawn:

  • Cash advance: £20,000
  • Factor rate:20
  • Total amount to be repaid: £24,000
  • Average card sales forecast (per month): £9,000
  • Average card sales forecast (per day): £300
  • Percentage of daily card sales to be paid back: 33% (£100)
  • MCA repaid in around: 240 days (8 months)

As the borrowing business received the money in just about a couple of days, they were able to invest it back readily. This opened up an additional revenue stream for them, and as they reached the targets laid down by the investors, they were also able to access a new line of credit.

Merchant Cash Advance – Who Is It Suited For?

Merchant cash advance is suited for SMEs that:

  • Require money urgently
  • Register significant card sales on a daily basis
  • Operate in cash rich industries and sectors

Are You Eligible For A Merchant Loan (Merchant Cash Advance)?

You’re eligible for a merchant loan if:

  • You’re a UK based business that accepts card payments,
  • You have a merchant account,
  • You generate at least £2,000 in card sales each month (over a minimum of three months),
  • You are a registered business (sole trader, partnership or limited company)

Advantages Of Business Cash Advance (MCA)

Now that we’ve seen how MCA works, let’s now see what advantages it has to offer to the borrower.

1. It’s Fast

The most important advantage is the speed. When you work with an experienced broker and specialist lenders, you can expect the entire process to complete within a matter of hours. This not only saves you a great deal of hassle, it also lets you put the money towards the requirements as soon as possible.

2. It’s Flexible

Since there is no interest rate to worry about, you know how much you’re going to have to pay back. This makes merchant cash advance incredibly flexible. On a good day, you will pay more and on a slower day, you’ll pay that much less. In other words, you will never be put in a position where you have to stretch your finances thin just to make the repayment.

3. No Need To Draw From Your Cash Transactions

You will only pay back a part of your card sales. You will still have full control over all the cash sales you make during this period.

4. No Collateral/Security Required

MCA is an unsecured form of credit. You will not be required to raise a deposit or collateral to get approved.

5. Poor/No Credit Shouldn’t Be A Problem

Most lenders tend to approve merchant cash advance applications from SMEs that have poor/no history of credit as long as the business performance is promising.

6. MCA Works With All Major Card Terminals

All major card terminals and machines are compatible with the auto debit facility for card sales.

7. MCA Can Be Topped Up

Some lenders provide the option of topping up your existing MCA account based on your history of repayment and business performance. This allows you to borrow more as and when required.

Relative Shortcomings Of Business Cash Advance (MCA)

  • Merchant cash advance is not at all suitable for businesses that do not accept card payments.
  • Young businesses that have little to no history of card sales find it difficult to get approved.
  • While MCA helps you gain access to funds faster, it also means that your daily cash flow will be impacted as long as the advance isn’t fully paid back.

How To Apply For A Merchant Cash Advance?

Merchant cash advance is a specialty form of financing. As is the case with all such finance products, it’s always a good idea to work with specialist lenders. Generic high street lenders don’t have the expertise or experience required to make such deals work, and the borrower has to face the brunt in the form of an unreasonably expensive offer.

At Commercial Finance Network, we help you get fast, flexible and low factor rate MCA offers from some of the most experienced and trusted specialist lenders across the UK.

Applying is easy – just fill in this form to message us or call us on 03303 112 646 to speak to a merchant cash advance specialist.

A Merchant Loan Can Be Used The Way You Want To

Unlike a mortgage or asset finance, merchant cash advance can be used to fund any and every business requirement as you see fit. Common examples include:

  • Opening up a new location
  • Managing the daily cashflow
  • Staff salaries
  • Funding new purchase orders
  • Refurbishments
  • Advertising and marketing
  • Purchasing new equipment
  • Investing
  • Paying off other loans

Make Merchant Cash Advance Work For Your Business

Given the number of positives it brings on board, merchant cash advance is undoubtedly one of the most versatile financing tools an SME can rely on..

To know more about how an MCA can help you grow your business and take care of emergency requirements, call us on 03303 112 646. You can also apply for a merchant cash advance directly by filling in this online form.

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UK SMEs overcome Brexit fears to seek investment for growth

The growth and funding ambitions of SMEs have strengthened during 2019 despite the uncertainty caused by Brexit negotiations.

According to a new report from asset-based lender Independent Growth Finance (IGF), almost three quarters (73%) of small businesses expect to see their revenues climb in the next 12 months, compared to 69% at the start of the year.

Of those seeking to raise funds to support growth, the average amount has also increased by 22%, or £250,000.

Three-quarters of businesses are looking to secure funds in the next 12 months. On average, they are seeking £1.4 million.

Most of this spending is earmarked for innovation with investment being poured into technology (45%) and product development (27%).

The survey found that 85% of respondents were open to switching their funding provider in exchange for more flexibility (35%), sector-specific expertise (32%) and 48-hour decision-making (26%).

John Onslow (pictured), chief executive officer of Independent Growth Finance, said: “It’s incredibly encouraging to see so many SMEs focused on the future. Making decisions that are best for them and their employees in an unpredictable landscape. This includes a greater willingness to switch funding providers to get the flexible funding they need, when they need it. We’re not surprised that our research shows three of the top five funding sources are alternative finance.”

Written by Miles Rogerson

Source: Asset Finance International

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More than half of SMEs unable to fund business ambitions

More than half (52%) of UK SME owners have business ambitions they feel they are unable to fund, alternative finance provider Nucleus Commercial Finance has revealed.

Business owners in the capital are struggling the most to match their ambitions, with over three-fifths (61%) of London SMEs unable to access funds.

Chirag Shah, chief executive, Nucleus Commercial Finance comments: “Although it’s great to see an increase in both profit and revenue for small businesses, it’s clear that funding challenges still remain.

“If business owners cannot access the funds they need to achieve their strategic goals, we could see a significant impact on the UK’s economy if SMEs are held back.

“With SMEs accounting for 99% of all UK businesses, the alternative finance industry has a significant role to play in helping businesses succeed.

“Particularly as high street banks become more reluctant to lend, we need to better educate small businesses on the other solutions out there.

“The alternative finance industry offers a more flexible and personalised approach to lending, meaning they can help business owners who otherwise thought they had no available option.”

Despite SME owners reporting that revenue and profit increased by 10% and 8% over the previous year respectively, businesses are reportedly struggling to achieve their strategic goals.

The biggest goals are increasing brand, marketing or online presence (19%), expanding across the UK (17%), increasing staff (14%) and launching a new product or service (13%).

By Michael Lloyd

Source: Mortgage Introducer

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Lack of available funding holds back a fifth of UK SMEs

Nearly a fifth (19%) of UK SMEs have missed a new opportunity in the past 12 months due to a lack of available funding, according to SME specialist bank Aldermore

The bank’s latest Future Attitudes study shows medium-sized businesses are worst hit, with over a quarter (28%) saying they have been affected.

The report, which surveyed over a thousand business decision-makers across the UK, found that those impacted are missing out on income worth an average of £76,888 each year.

Regionally, businesses based in London are losing out on the most additional income due to missed business opportunities, £135,791 on average annually.

This is followed by those based in Wales, Scotland and Northern Ireland (£67,380 per year).

Lack of funding poses problems for those SMEs focusing on scaling up. Achieving growth is the top business objective for almost two fifths (37%) of SMEs, while almost a quarter (24%) are prioritising developing and expanding their products and services. Additionally, just over a fifth (21%) are concentrating on expanding in the UK.

Furthermore, business owners are apprehensive about not being able to innovate and grow.

A quarter (25%) of SMEs state that cash flow is their biggest business concern over the next 12 months.

Moreover, one in 10 (12%) feel keeping up with new technology is their main worry, while a sixth (15%) are anxious about attracting, retaining or upskilling staff.

Tim Boag, group managing director, business finance at Aldermore, said: “It’s concerning to see that almost a fifth of SMEs are missing out on opportunities as a result of financing issues. Small businesses need adequate cash to innovate, grow and keep up to date with the latest developments.

“That’s why it’s important that lenders understand and are responsive to the needs of SMEs.

“By providing specific solutions in a timely way, which meet business needs, we can start to address this problem and ensure SMEs – the lifeblood of our economy – continue to thrive in uncertain times.”

Written by Tom Seymour

Source: Asset Finance International

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SMEs are shunning traditional banks

ThinCats, the leading fintech lender to mid-sized SMEs, has today published new research highlighting a growing lending divide as younger, modern businesses move away from traditional lenders towards alternative finance providers.

For businesses less than ten years old, 32% call on their bank as the lender of first choice compared to seven-in-ten (71%) businesses over 35-years old. The younger businesses were also more likely to pick an alternative finance platform with more than one-in-five (23%) compared to 4% of the oldest SMEs.

Likewise, in businesses where decision makers were aged under 35, two-thirds (65%) said a traditional bank was not their first port of call for funding. This is in contrast to businesses with decision makers aged 55 and over, where it was just under one-third (30%). For these groups (under 35 decision makers) 22% said they would choose an alternative finance platform, while only 6% (over 55) said they would consider the option.

Sectors such as IT, telecoms and marketing, which are traditionally knowledge or service-based are those leading the way in moving towards alternative finance providers.

Damon Walford, Chief Development Officer, ThinCats, “The SME lending ecosystem is complicated. Changes in the economy, technology and how people work mean that traditional lending models are not meeting the needs of the modern economy by excluding thousands of SMEs from potential funding. Thankfully, it’s encouraging to see that smart minded entrepreneurs are switching to the growing number of non-bank lending alternatives.”

Traditionally, high-street bank lending focuses on asset-backed financing that requires SMEs to provide a physical asset (such as equipment or property) as collateral for a bank loan. Yet, for thousands of service-based companies with few tangible assets, traditional banking credit models often overlook the wider value of a business including the cash being generated.

The research, which surveyed 512 UK SMEs with between 10 and 249 employees, also shows 30% of SMEs who were rejected by their first-choice lender, stopped searching for external funding altogether. This suggests that many businesses, of whom 55% said high street banks were the first lender approached, are potentially giving up when there are suitable alternatives available.

Positively, appetite for lending remains high with more than a quarter of businesses (27%) saying they applied for funding within the last year.

Walford added, “Cashflow lending is a solution for thousands of SMEs, where lenders look at the underlying cash flow generated by the business. For businesses who are service-focused like IT, telecoms and marketing companies it works perfectly. We’ve found that many of these businesses are also more willing to share their accounting data, opening them up to financial providers beyond their banks.

“I hope this message gets out to more SMEs and would encourage them to plug into the growing network of accountants and commercial finance advisers now advising on alternative finance options. It’s critical that UK entrepreneurs can access modern funding solutions for a modern economy.”

BY PETER SMYTH

Source: London Loves Business

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SME lending hits 2-year high – bullish approach essential to Brexit survival

So says Angus Dent, CEO of ArchOver, following the news that the Bank of England has announced that UK SME lending hit a two-year high in June, despite Brexit uncertainty continuing to escalate.

Dent explained to IFA Magazine why we shouldn’t be surprised to see SME lending go up amidst this uncertainty, and why the FS market needs to follow suit and support UK business.

“The message here is that business must continue as usual, regardless of the Westminster-Brussels psychodrama. Businesses still need cash to invest. New projects still need to launched and new customers still have to be served. The SME market in this country is still pushing for growth, however incompetent its political leaders.

“We shouldn’t be surprised to see business lending at a two-year high. Good debt is good for business. Injecting cash into stable companies is the foundation of economic growth – we need to see more of this bullish approach from business as we approach October 31st. We need to see companies taking control of their own futures with sustainable growth finance – not emulating our perpetually dithering government.

“The question is whether the UK’s financiers will support them. The banks have been routinely turning down smaller companies’ loan requests for years now. They may have low-cost capital in spades, but they’re not letting British SMEs put it to work. Instead, businesses need to look beyond the high street and seek out alternative finance that will treat them with the respect they deserve. SMEs need personalised, flexible finance if they’re to make it through the next six months in one piece.

“It’s good to see our small businesses taking this challenge head on. Now we need to see the financiers following suit.”

BY ANDREW SULLIVAN

Source: IFA Magazine

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10 Common Finance Hurdles UK SMEs Face (And How To Overcome Them)

If you run an SME, you probably are familiar with these all too well. But it’s easier to overcome these finance hurdles than you think!

First of all, let us begin by admitting and acknowledging the harsh reality. The UK economy has been through a constant grind of speculation, debate and uncertainty over the past few years, all thanks to Brexit. Without commenting on the issue, we would just like to mention that not all SMEs are happy about the way things have been unfolding. Nearly 40% of UK SMEs think that Brexit – if and when it actually happens – will leave them worse off in terms of financing and sales. That’s a very serious trend.

However, that’s only a part of the finance riddle. There are quite a few non-seasonal hurdles that SMEs have to face while applying for and getting commercial finance. Here are our picks (and some advice from our experts on how you can easily overcome them).

1. The Personal Credit Vs Commercial Finance Conundrum

This is by far the most common confusion we’ve seen SMEs struggle with. Much of this has to do with the fact that most SMEs are built ground-up without any solid plan for expansion. This, however understandable, is not the right approach. When you start a business, it’s advisable to treat it like a business. Sure, you can use your personal credit cards or even mortgage your home – but you need to know where to draw the line.

Personal loans tend to reduce your creditworthiness, making things difficult for when you want to get a business loan. The best way to overcome this conundrum is to separate personal and business finances as strictly as you can. Your personal creditworthiness should be a credit to your business – not a burden.

2. Bad Credit

This is the most obvious hurdle. If you have bad credit, you’re going to struggle to get a good deal (or any deal, for that matter). It’s important to know what impacts your credit in addition to the usual do’s and don’ts.

We’d like to note here that having bad credit doesn’t spell the end of the road by any stretch of imagination. We, at Commercial Finance Network, regularly broker bad credit loans for many otherwise successful SMEs. You can read more about our adverse credit mortgage services here.

3. No Credit History

Not many SMEs take business credit seriously, thanks mainly to the fact that most operate as sole traders. Quite naturally, it’s not very common for SMEs in the UK to have business credit history.

The easiest way to establish business credit history (you’ll need it when you want to apply for high-end commercial finance products) is to register your business and start trading regularly. Most companies, just by trading actively, are able to establish various credit tracks that help towards their credit history. To speed up the process, you can also use easy-to-access finance products like credit lines, business credit cards, overdrafts and so forth. Short-term finance products like bridging loans and invoice finance can also be very helpful in building a good credit score.

4. Multiple Applications

As is the case with personal credit, your chances of getting approved for a commercial finance product may get severely hampered by multiple applications. If you overestimate your creditworthiness and have half a dozen applications turned down, it’s almost always going to leave a dent in your business credit history.

This, however, is easily avoidable. If you want to directly work with lenders, make sure you are familiar with the lender’s expertise, expectations and track record. If not, you can send your applications through a reputed whole of market broker like Commercial Finance Network to improve your chances of getting an affordable and customised finance deal.

5. Going After Incompatible/Unsuitable Products

Another easy to avoid problem.

If you’re in need of commercial finance, make sure you know what exactly it is that you need. Specialty finance products are always more affordable than blanket packages. For example, many SMEs apply for a generic business loan to cover all sorts of expenses, instead of going for specialty, focussed loans. This not only makes things more expensive; it also increases the chance of having their application rejected.

An easy fix is to know what commercial finance products are available out there, and how you can best customise them to your needs.

6. Not Making The Right Points

This shouldn’t be a point of discussion, but we’ve seen too many SMEs fail to paint themselves in good light.

If you want to work with specialty lenders (like the ones we have on our panel), you will need to make sure that you know your business inside out. And by business we don’t just mean your day to day operations. You need to be able to demonstrate how you are planning to fuel the growth and overcome the competition. A detailed business plan that touches on all these point (and more) will always be helpful in getting lenders on board.

7. Weak Cashflow

This doesn’t and shouldn’t apply to every SME out there. However, you need to ensure that the cashflow numbers are always as healthy as possible.

Lenders, by and large, look for affirmative signs that tell them that you’ll settle the dues. And there’s no better sign of surety than strong cashflow numbers month after month.

8. Short On Security

Many commercial finance products require you to attach a security. It could range from personal guarantees and shares to properties and even vehicles.

Some specialty products (a good example is that of invoice financing) may not work at all without an inherent security. So, before you apply, know how these products work and what sort of security might be needed to get your application through.

9. No Trading History

Many SMEs try to apply for commercial finance right after they start trading. This is a rather hasty approach, because at that point, no SME can show any sign of credibility – no credit history, no volume of transactions and no track record.

To avoid this, we advise our customers to establish a long-enough trading history (typically six months or longer).

10. Tie All The Loose Ends

If your business has availed any loans in the past – however small the amounts – make sure you pay them off at your earliest, before you apply for commercial finance. If you aren’t in a position to make these payments right away, make sure these loans are represented correctly on your credit file, so that lenders can understand why you needed them and how you’re going to pay those back.

Commercial finance can appear daunting – but trust us, it’s anything but. With specialist lenders who know what your business needs, we’ve got you covered. To request more information or to request a call back, please call us on 03303 112 646. You can also get in touch with us here.

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Thousands of UK SMEs seeking finance to improve cash flow

Thousands of UK companies plan to use finance to improve their cash flow in the future, according to new research.

Analysis by Purbeck Insurance Services found that 28% of SME executives interviewed said they were turning to external funders, including to cope with late payments.

Todd Davison, director at Purbeck Insurance Services, explained: “Cash flow is the life blood of any small business. But for a whole variety of reasons, not least the current economic uncertainty, an SME business owner may find themselves looking at unpaid customer invoices, bills from suppliers and wage rolls, and wonder where the money is going to come from.

“Small businesses are owed billions in late payments; whole supply chains are affected and end up borrowing to fill the gap while they wait to get paid.”

However, he warned that using finance to resolve cash flow problems is a “double-edged sword” and business owners should first consider operational changes that might deal with short-term problems.

Davison added: “It would be prudent for the business to take the time to review its financial situation as a whole. In doing so, the owner may find some changes can reduce the need for, or at least the amount of, additional finance.”

Strategies could include restructuring current finance arrangements, reviewing credit terms to suppliers, outsourcing the late payment debt, improvement stock control or looking at alternative sources of income such as renting office or warehouse space.

Other reasons for sourcing finance included acquiring equipment (27% of respondents), supporting a business acquisition (10%), R&D (9%) or recruitment (7%).

Davison recommended that if business owners are providing personal guarantees to secure loans, it is important to consider insurance to protect their personal assets should they encounter repayment problems.

Written by Miles Rogerson

Source: Asset Finance International

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Two-thirds of small business owners ‘get sleepless nights over valuations’

Two-thirds of UK small business owners say they get sleepless nights over company valuations, according to new research.

The latest MarketInvoice Business Insights survey found that 66% of SME business owners said their biggest priority is increasing their company valuations.

Despite the focus on driving value growth, only 30% of businesses increased their valuations by more than 10% in the past 12 months, the survey revealed.

The average small business in the UK is valued at £2.9 million, bringing the total value of all UK SMEs to around £3 trillion.

Firms in the education sector have the largest average value, at £4m, and business owners in the sector are particularly concerned about value, with 81% in the sector describing it as a priority.

Business owners said that premises, the products, and people are the key things which bring value to a company.

Despite highlighting the importance of increasing company valuations, business owners said that they saw finding appropriate financing as a major hurdle.

Business owners said they are reluctant to cede control to Dragon’s Den-style equity or venture capital investors, with only 6% saying they have used this funding to drive growth.

More than a quarter, 26%, said they favoured invoice finance, while 22% of business owners said they use asset-based finance.

Anil Stocker, co-founder and chief executive officer of MarketInvoice, said: “Business owners seem to be driven by company valuation but acknowledge how the right kind of finance can really help drive that number.

“It is imperative that they stay focused on their product or service offering and ensure the fundamentals are right first.

“UK SMEs are thinking big, which is great for our economy, employment and global positioning.

“There are some huge macro and political changes taking place with Brexit and the US-China trade challenges but it’s great to see entrepreneurs seeing the growth opportunities around these events.”

By Henry Saker-Clark

Source: Yahoo Finance UK