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Getting Your SME Financing in Order


Getting Your SME Financing in Order

It’s tough securing business finance from the high street banks in the UK and even harder to secure a fixed rate lending deal. Interest rates rose for the first time in a decade last November and are expected to continue to climb. This has prompted CEO at Hadrian’s Wall Capital, Marc Bajer, to urge corporate finance accountants to consider the potential impact on SME funding. Writing in Accountancy Age, Mr Bajer warns that many small businesses are about to be exposed to rate rises they will have never experienced during their time trading.

According to Hadrian’s Wall Capital research, a further interest rate rise of 0.25% could cost British SMEs a total of £355 million in additional interest payments in one year. Those with annual interest payments due on floating rate loans would see a jump from £3.7 billion interest to over £4 billion. Over the last five years, the percentage of business lending offered on a fixed rate basis has dropped from 50% down to just 11%. Is it time you considered alternative borrowing options to get your SME financing in order?

Asset Finance

Sometimes, in order to grow or improve your business, you need to buy expensive equipment, which to purchase outright would require a considerable financial investment. Rather than seeking a traditional bank loan, you could choose to go down the asset finance route. You work with a specialist lender that allows you to pay for the equipment over a period of time. This could be on a hire purchase, operating lease or finance lease basis. You get to avoid the financial hit of buying the item outright and may be able to get your hands on much needed equipment a lot more quickly as a result.

Peer to Peer Lending

If you’re unfamiliar with this type of lending, chances are you won’t be for long.

Last year, peer to peer lending for small businesses rose by an impressive 51% according to the Small Business Finance Markets Report 2018. To secure a loan, small businesses must complete an application in much the same way as applying to a traditional high street lender. However, applications are submitted via a peer-to-peer lending platform, where businesses are matched with lenders who would like to earn interest on the money they agree to lend.

Invoice Finance

There was a 13% jump in use of invoice finance in the third quarter of 2017 according to UK finance, but while the sector now stands at over £22 billion in the UK it’s still a financing method that remains a mystery to some. Cash advances through invoice discounting could allow you to access working capital at a lower cost than working with traditional lenders or provide a solution when you can’t access a business loan. You’ll need a solid invoice book in order to secure a good deal as the percentage you are able to loan will be decided in part based on the perceived risk of lending to you. If you need to invest or simply want to improve cash flow, invoice finance could be a smart way to go.

PayPal Capital Advance

Does your business use PayPal to accept payment from customers or to purchase supplies? Do you know that PayPal offers its own business finance product? Over 30,000 British SMEs have used PayPal Working Capital advances since 2014, but they’re not suitable for everyone. You need to have held a PayPal business account for at least three months before making an application and you’ll also need to be hitting a minimum of £9,000 annual sales.

The company uses its insider knowledge about your PayPal sales to decide whether to advance you funds but can only offer advances of up to £100,000. You’ll choose a repayment plan and pay one off fixed fee for the lending. It’s a clever sideline from a company that is already invested in your business continuing to sell so that they can earn fees from your transactions.


For SMEs that don’t want to give up large chunks of their business to investors, crowdfunding through designated platforms is a great way to access finance through a customer base or community that’s already at least partially established. One of the major advantages is that you can pre-determine the sizes of investment you’ll accept in exchange for tiered rewards. You’ll need to put together a great pitch about what the cash is for. Whether it will fund the move of your street food business into a permanent restaurant home or is required to bring an exciting new product to market, it’s essential that you know your audience and write to sell in order to get the crowd funding flowing. Naturally, crowd funding towards higher figures is difficult, so this time of funding lends itself to smaller financial goals for specific projects.

What’s your financial strategy for sidestepping interest rate rises when it comes to financing your business? Will you rely on one of the above financing methods or go for a multi-strand approach?

I am the founder of Startup Today. I am the main writer and have put in many hours of work into creating this blog. If you want to find out more about me then lets get in contact.

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