Cash Flow Finance
A business loan is money thats lent to a business for business purposes. It will be paid back over monthly affordable installments over a period of time with added interest. The business will receive a lump sum of money from a lender which they will be able to use how they like for their business.
The most popular type of business loans are Unsecured Business Loans and Secured Business Loans.
Secured Business loans are protected by an asset such as a home, car, stock, bonds or personal property. The lender will hold the deed or title until the loan is paid in full. A secured loan means you are providing security that your loan will be repaid. From a lender’s perspective, they have your asset as collateral so if you can’t pay your loan back, they will be able to sell your asset to cover what you owe.
Unsecured Business loans are the reverse of secured loans where you don’t need to put any collateral up. As the loan won’t be secured against, a lender will see this as a higher risk because if you were unable to pay the loan back, they won’t have a security net.
If you’re turned down for an unsecured loan, you may still be able to obtain secured loans.
What can you use a Business Loan for? Some examples:
- Boost your cash flow
- Manage uncertainty
- Pay business expenses
- Grow your business
- Help with payroll
- Cover revenue gaps
- Purchase new machinery, equipment or vehicles
Invoice Finance is a way of lending money based on what your customers owe to your business. Unpaid invoices represent money that will be paid to you, but you have to wait for the payment terms to elapse. This could be anything from 14 days to 90 days or more. Invoice finance gets you most of the cash immediately, so you don’t have to wait to get paid. The concept is simple — rather than waiting days or weeks for your invoices to be paid by customers, lenders advance you most of the value immediately. That means you get paid faster for completed work allowing you to focus on running your business.
Invoice Factoring is a financial product that enables businesses to sell unpaid invoices (accounts receivable) to a third-party factoring company (a factor). The factoring company buys the invoices for a percentage of their total value and then takes responsibility for collecting the invoice payments. Invoice Factoring is an increasingly popular form of alternative business funding and has the following benefits:
- Credit control services: the lender handles collecting payment from your customers.
- Factoring providers can credit check potential customers for you.
- Easier to secure for small or early-stage companies.
Invoice Discounting is a form of short-term borrowing against your outstanding invoices. It is usually used to help improve a company’s working capital and cash flow position. With invoice discounting, you maintain responsibility for your sales ledger, payment chasing, and invoice processing:
- Invoice discounting can be arranged confidentially, so your customers will have no idea you’re borrowing against their invoices.
- You keep managing your own credit control and debt collection for customer accounts, helping you to build and maintain closer relationships with your customers.
- Invoice discounting is cheaper than factoring.
VAT loans are short-term loans used to cover the VAT element on commercial property purchases. A large proportion of property and land acquisitions are subject to VAT which must be paid in addition to the agreed purchase price which can significantly increase the cost of the transaction.
A VAT loan gives a business a short-term finance facility to fund the VAT part due on a number of transactions which include but aren’t limited to vehicles, stock, land, property, equipment, plant and machinery + many more.
VAT loans can also be used to bridge the gap between submitting a VAT reclaim to HMRC and receiving the funds which can help to ease a business’ cashflow and improve working capital.
The typical facility size for these types of loans starts from £10,000 with no upper limit.
Stock funding allows companies the opportunity to buy and sell, more of their products. In order to get this, a stock finance provider will provide you with a funding limit where you are to purchase goods up to this limit at your own discretion.
The lender will then either pay suppliers on a pro-forma basis for the goods or the funds can be provided directly to the business which they can then use to purchase goods from the supplier themselves.
Stock funding solutions typically work on a revolving basis, so businesses can repay the facility at any time without a penalty, and then are able to re-draw against the facility when they need to buy more stock. Stock finance is available for a variety of goods across all sectors, including goods that are pre-sold, speculative, component parts or raw materials. Stock finance solutions can often be the key that unlocks potential untapped growth within a business.