Ever since the beginning of the Covid-19 pandemic, businesses have been on much shakier ground than before. Uncertainty reigns, which is why many are looking into sources of funding outside of traditional bank loans.
Companies that have either been rejected for loans in the past, have poor credit or are unsure about the amount of funding that they need still need to get that injection from somewhere – meaning that alternatives are necessary. In this article, we’ll explain four of the options available to you if you find yourself in such a position.
Business cash advance
If you need a quick cash injection and you have a good credit score on your side, a business cash advance might be the right choice. This is a type of unsecured cash loan suitable for short-term usage. There is no collateral involved; the advance is issued based on your credit score. It is paid back gradually in line with your business’s success – payments take the form of a fixed percentage of your takings so, if you have a quiet month, you won’t be overwhelmed by a repayment responsibility.
Another viable alternative to a traditional bank loan sees you use your business’s own assets as collateral to secure funding. This could mean anything from accounts receivable to the inventory of stock or property – generally, the more liquid, the better.
Recovery loan scheme
Part of the UK government’s response to Covid-19 was creating the Recovery Loan Scheme, which is open to businesses of any size that require assistance because of the pandemic. You need to prove that Covid-19 is responsible for the challenges that are leading you to seek funding. Still, if so, it is a useful way to secure finance to manage cash flow, investment, and growth – with the government guaranteeing 80% of the finance to the lender.
Making contact with a high-net-worth individual who would be willing to offer financial assistance can be a big boost to a small business or entrepreneur. This would usually involve an agreement for the investor to receive a stake in the company in exchange for capital, so if you’re committed to retaining full control, then this might not be what you want. However, the quick injection of cash offered by such a solution can make all the difference to a small business.