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Sources of finance for SMEs: the alternatives

2016 has been an eventful year for SMEs in the UK. Ongoing political and economic uncertainty has resulted in currency exchange rate volatility and increasingly cautious traditional banking institutions - and yet, many small businesses are performing rather well. In response to the market’s fluctuations, investment strategies have shifted direction (not disappeared) and as a result, sources of finance for SMEs have grown rather than shrunk.

Contrary to popular opinion, the funding well has not dried up. Many large venture capital firms are actively looking for lucrative opportunities to invest in and UK entrepreneurs have attracted £160m of funding across 42 deals since Brexit. This is good news for small business owners, however such an investment does essentially ‘buy’ a percentage of ownership until such time as the company owners can buy it back.

Smaller deals are just as attractive and people are lining up to take advantage of traditional P2P lending platforms that slice up an investment into smaller chunks. These platforms are creating a more competitive environment for finance and they provide SMEs with access to fast working capital without having to give away their company equity.

The challenge here though, is that traditional P2P lending platforms offer a one off investment with no potential to grow with the business. Each time a small business needs more funding, it has to go back to the drawing board and raise more money.

The list of sources of finance for SMEs doesn’t end there. Alternative finance lenders offer funding solutions that grow with company turnover. A funding limit that increases proportionate to turnover is vital to supporting small business growth. What’s more, business finance doesn’t require handing over equity in the company, so no matter what you choose to secure your finance against, you’ll never lose ownership of your business.

All too often, small business owners don’t realise that they can use all of their company’s assets to raise cash rather than just one asset class. It’s important that they understand that there are many more facilities available that don’t just focus on one asset class. A business can raise critical funds in numerous ways including invoice finance, property finance, plant machinery and other types of asset finance.

As a leader in the alternative finance community, Nucleus is able to provide sources of finance for SMEs that combine the speed and flexibility of a P2P lender with the strength and product range of a bank. Get in touch if you want to find out what assets you could use to get finance.

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