smallbusiness.co.uk: Helping your business think big

Alistair Darling’s Budget highlighted the problems many SMEs have in obtaining finance. If you are finding it difficult to get a conventional business loan from the bank there are alternative sources of finance available.

Securing finance remains a significant problem for many SMEs. But you should remember that bank loans are not the only kind of credit on offer. Think creatively and you can help your business to take advantage of new opportunities.

Ask the business angels

Despite the fact that many banks remain reticent to lend, there remains a large number of cash-rich individuals looking for a good investment. So-called ‘angel’ financing looks set to increase as we emerge from the downturn and potential investors hunt for firms with high growth potential.â¨â¨You should remember that you will have to give away part of your business in order to secure angel investment and should think carefully about whether you are prepared to do this in exchange for finance. For more information visit the British Business Angels Association’s website.

Free up money in your invoices - improve your cash flow

Invoice finance and factoring products provide means to free up money in your invoices, and improve your cash flow situation. A factoring partner will pay you up to 90 per cent of the face value of your invoices within 24 hours raising them. Depending on your arrangement, they may then chase the invoice for you. Once the invoice has been settled, you will be paid the remaining value minus a small fee. If you are experiencing late payment problems with clients, this could be the answer.

Cash support from the government

There’s not a lot of cash support available from the government to entrepreneurs, but the Enterprise Finance Guarantee scheme is perhaps the most well-known measure. However, the government will only support viable firms. You will therefore have to demonstrate that your business has profit-making potential, and you will be expected to back this up with supporting documents including a comprehensive business plan. More information is available on the Department for Business Innovation and Skills’ website.

Company overdrafts

Although business loans remain hard to come by, there is some evidence that overdraft availability is improving. As such, you may wish to consider this as an alternative form of finance, particularly if you are more concerned about immediate cash flow problems than with expansion.â¨

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