With restauranteurs, hoteliers, and publicans finding it harder than ever to find funding from banks, it comes as good news to many that there is alternative finance available.
While many of the smaller, independent hotels, restaurants and pubs will be aware of overdrafts, loans and mortgages as ways to fund business growth, there remains a serious lack of understanding about what else is actually available. Bank lending isn’t the same as it used to be before the recession struck. Previously a hopeful entrepreneur could walk into a bank with their concepts and ideas and almost be given a blank cheque for them to make it so. But now the system has become so rigid and complicated that just knowing who to talk to can be a challenge. There’s a whole host of alternative finance available for businesses, with a large amount of variety in how they operate.
Short Term Business Loans
Short term business loans can be used for any business reason including stock purchase, renovation, expansion, equipment, as well as cash flow and is available for most business types. Decisions are fast and minimal paperwork is required to apply. Boost Capital is a direct funding source and leader in unsecured business funding solutions for small to mid-sized business across the UK. Finance from Boost Capital gives growing SMEs access to funds in as few as two days. For your average small to medium sized business, Boost Capital is here to help with fast and easy solutions.
A hotel owner in Merseyside was in need of a refurbishment of the bedrooms, but they were growing frustrated after their dealings with the banks. We were able to help them with a specialist hospitality loan, funding them £12,000 at a time that suited them and the business. This finance was given based on the hotel’s recent trading history and cash flow, and it helped them as it has for hundreds of other businesses.
Peer 2 Peer Consumer Lending
Peer-to-peer lending, also known as crowdlending and sometimes abbreviated to P2P, is the practice of lending money to unrelated individuals, or “peers”, without going through a traditional financial intermediary. This lending takes place online on peer-to-peer lending websites using various different lending platforms and credit checking tools.
An issue with P2P financing is that it is strictly limited to the interest rate, so the risk/reward ratio for the investor could be a negative one. The probability of gain or loss is impossible to define, so this makes the investment a gamble, working with an unknowable, and potentially unfavourable, mathematical expectancy.
Invoice trading enables SMEs to auction their invoices online. People do this to gain quick access to a lesser amount of money than the full invoice amount, rather than waiting for the invoice to be paid. They can sell them individually or in bundles to the buyers who offer to advance them the most money, the seller then has the opportunity to buy back the invoice after 30, 60 or 90 days.
Buyers include a wide range of institutional investors, high street banks, asset-based lenders, cash-rich companies and high net worth individuals. Buyers get a fee for stumping up the cash, which varies from auction to auction.
An example of alternative funding that has gained notice in recent years is online crowdfunding. This is an area in which popular fast-growing brewer BrewDog has found past success. By asking a large amount of people each for a small amount of money, primarily via the internet, the brewing company have already successfully raised millions of pounds during three separate campaigns and are currently in the middle of their fourth campaign now for £25m. Having previously found their success by crowdfunding independently, BrewDog have now turned to Crowdcube in their attempt to secure the full amount of funding that they’re wishing to acquire. Crowdcube allows ordinary people to invest in ideas and products, in exchange for shares within the company that they’re investing in.
Due to their cult-like status among aficionados of its craft beers, Brewdog is probably one of the few companies in the UK that is capable of successfully going down the self-crowdfunding route. However, the success of their independent fundraisings are dependent on the loyalty of their already well-established customer base. The main reason for them to now be turning to another crowdfunding service is perhaps due to the unlikelihood of them being able to reach their goal this time with independent crowdfunding alone, and even then there’s no guarantee that they’ll succeed. Crowdfunding is not without its pitfalls, as set out here by Bluebird Global:
- False optimism: Although a vast majority of start-ups fail, with the promotion of crowdfunding, the public is given a false sense of security in their investment. Despite crowdfunding groups making the risks clear to investors, the UK’s Financial Conduct Authority stated that crowdfunding platforms could give a “misleading or unrealistically optimistic impression of the investment”.
- Potential for fraud: Although crowdfunding can reduce the risk of investment, it can also engender a potential for fraud. Not all start-ups are legitimate and despite background checks and formalities required for crowdfunding platforms, without the excessive red tape, there have been instances of misrepresentation amongst the businesses vying for investment on these crowdfunding platforms.
- Focusing on the general public: Some critics say that with the focus on the general public rather than professional investors, crowdfunding platforms may be taking advantage of investors. Not only might they be unaware of risks, with the constant new issuances of new shares, shareholders are in direct risk of shareholder dilution, as the percentage of ownership decreases with more investment.
The specific type of short-term, unsecured lending offered by us at Boost Capital is a relatively new form of finance to the UK, but we are a distinct and important piece in the jigsaw puzzle of alternative funding for small businesses. And companies turn to us because they want precisely what we have to offer. Given the ease and simplicity of our loans, SMEs in a variety of sectors have used funding from Boost Capital to grow their business. From restaurants and hair salons to medical practices and wholesalers, our financing solutions have helped businesses in all types of industries.
More businesses than ever before are looking to Boost Capital for their business financing needs. To learn more about how our UK small business loans work or to explore the business financing options that are available to you, contact us today!
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