For small firms, which must deal with uncooperative lenders and reams of paperwork, cash flow is a constant problem. Fast financing and loans are becoming more and more popular as a result.
Small companies aren’t getting the financing they need because, according to 31% of respondents, their company is too new, their debt load is too high, and there isn’t enough collateral (20 percent). Only one in five firms believed the borrowing procedure to be simple, according to Yolt‘s study.
However, we’ll look at a rapid business finance alternative in this post that could be better for you.
>See also: Small business finance – the complete guide
What type(s) of funding can I get?
Les Roberts, content manager at Bionic, said: “Typically, a business loan can range from as little as £1,000 up to several million. Repayment terms can vary from one month to 15 years, depending on the type of loan and the lender. Business loan rates in the UK will also vary, depending on a number of factors – from the length and size of the loan to your business’s financial position.”
With this kind of funding, you’re generally looking at secured loans (which require something that you own as collateral), unsecured loans (a loan that doesn’t involve any kind of collateral), and merchant cash advances (where you repay your loan as a percentage of future sales).
What can I use the funding for?
Each provider may have stipulations, but you can really use your loan for anything. This could include:
- Improving cash flow
- Buying equipment/stock
- Take advantage of a one-off buying opportunity
- Clear debt
- Pay suppliers
The British Business Bank said that the main reason SMEs is to support their business working capital or cash flow.
“Fast finance is generally better used when you need to raise funds quickly, such as to bridge a short-term cash flow issues or to take advantage of an opportunity that might have arisen, such as buying some stock in bulk at a discount,” said Stuart Airey, head of corporate finance at Accounts and Legal. “It’s not totally suited to longer-term borrowing, although can be used that way if other options aren’t available.”
>See also: Alternative business funding for small businesses
What happens if I can’t repay my loan?
If you can’t repay, then fees will likely be added, and/or the interest rate will be increased.
Will I need a business bank account?
If you’re a sole trader, you may be able to get away with a personal bank account but otherwise, you’ll need a business bank account. This can also depend on your credit score. In general, you’re better off having a business bank account, even if you’re a sole trader. Read more at 5 benefits of using a business bank account over a personal account.
>See also: Small business startup funding
Fast business financing risks
As was previously noted, demonstrating your company’s viability might be difficult. The greatest challenge, according to Airey, is being able to borrow money. “Many lenders won’t consider them an investible firm until you have a couple of years of lucrative trade experience and are prepared to give a personal guarantee. Because of this, it is quite difficult for newly founded enterprises to get finance.
Short-term loans may provide a ready-made solution for small companies in need of an instant infusion of capital, according to Karen Barrett, CEO, and creator of Unbiased. Applications are processed far quicker than conventional loans, often authorized within 24 hours. But take heed. They often come with higher interest rates and severe penalties for late repayment because of the laxer underwriting procedure. Therefore, it would be good to consult a specialist before agreeing to the terms.
By asking the correct questions, you may reduce this. According to Airey, you need to inquire:
- What additional choices are there?
- Whether seeking equity financing could be a better choice
He continued by saying that firms must evaluate how they will pay back the debt and ensure their future cash flows will be adequate to cover payments.
When it comes to financing, “small firms often don’t shop around, and the majority choose the first offer they get, which may not be the greatest product available to them,” according to Airey. Fast finance is often simpler to qualify for, but it might take time to apply to many lenders because of the different documentation requirements.
Protecting your credit score may be one of your worries. Most businesses will just do a light credit check, which has no impact on your credit score. However, be careful to verify before you apply.
The finest quick loan companies in the UK
Here are a few UK-based companies to help you start your search since, as Airey notes, choosing the appropriate supplier may make a difference. Remember that most of them will have qualifying requirements related to your trading history and/or minimum turnover.
Loan limit: £20,000-£250,000
Repayment term: 1-12 months
Type of finance: Unsecured loans
Time taken for approval: Money will reach your bank within 24 hours
Can I repay early? No
Cashsolv instant loans are specifically designed for emergencies but there’s no guidance outlining how you should spend it.
You have the option of either repaying in one lump sum at the end of the loan term or to repay in monthly instalments.
Cashsolv asks for “reasonably up-to-date” accounts before they give you a loan. You’ll also have to be able to declare how you intend to make repayments along with supporting documents. Cashsolv will be doing ID checks to keep itself in-line with money laundering regulations and you’ll be required to provide a proof of address.
As this is a short-term loan, early repayments won’t be accepted.
Loan limit: £5,000 – £250,000
Repayment term: Six – 60 months
Type of finance: Secured and unsecured loans
Time taken for approval: Same-day approval
Can I repay early? Yes, on loans from £10,000
Century Business Finance promises a two-minute application process and low rates.
There are a few different financing options available: cashflow loans, unsecured business loans, same day business loans, VAT & tax business loans and fast business loans. Once approved, the money will be in your bank account the same day. Note that a financial services intermediary fee will be taken out of your account within seven days of receiving the funding.
You must have been trading for at least six months and a turnover of £72,000 per year.
Century Business Finance will allow you to repay early on loans from £10,000.
Loan limit: £1,000-£750,000
Repayment term: From one day to five years
Type of finance: Unsecured
Time taken for approval: Within one working day
Can I repay early? Yes
Iwoca can give loans to all businesses, no matter the age or sector. It’s open to sole traders, partnerships and limited companies. It also has a two-minute eligibility check – and the whole application process takes five minutes.
Accounts come with an account manager.
If you go for a flexi-loan (repayment up to 24 months) then there are no extra fees and charges. If you go for a business loan, there will be a 6 per cent funding charge spread out over the first few repayments.
You’ll need bank statements from the past year in order to apply (or you can link your account via Open Banking). The other documents required will vary based on the type and size of loan, but could include VAT returns or company accounts.
Loan rates start at 2 per cent and there are no fees for repaying early.
With the flexi-loan option, you can apply for a top-up once you’ve paid back a third of your original credit limit. Updated information about your business will be required at the time of topping up.
Loan limit: £5,000 to £500,000
Repayment term: Repay weekly
Type of finance: Secured business loans and merchant cash advance
Time taken for approval: Receive your provisional decision within 60 seconds
Can I repay early? Yes
Capify will take a small percentage from your business bank account each day rather than a lump sum.
Merchants will typically receive up to 130 per cent of monthly their gross sales. You must have been in business for at least 12 months with minimum gross sales of £10,000 a month and no open bankruptcies.
To apply, you must have six months’ worth of bank statements, copy of void check and photo ID.
For the merchant cash advance you need to take at least £6,000 a month in card payments and have six months of trading history.
Your application will need to be filled out by 51 per cent or more of your business ownership, you also need four months recent credit/debit card processing statements and your most recent monthly bank statement.
Loan limit: £10,000 – £300,000
Repayment term: Dependent on debit and credit card payments
Type of finance: Merchant cash advance
Time taken for approval: Within 24 hours
Can I repay early? N/A
365 Business Finance has no fixed monthly payments. Instead, you pay back a percentage of your debit and credit card sales. This means that when your sales are up, you’ll be able to pay more of your loan balance and when sales are low, you pay less.
To be eligible, you must have been trading for at least 12 months and have an average monthly credit and debit card turnover of £10,000.
Loan limit: £5,000 – £500,000
Repayment term: Up to five years
Type of finance: Unsecured loan
Time taken for approval: Minimum four hours
Can I repay early? Yes
Love Finance offers a completely automated service with interest rates as low as 2.9 per cent. Funds in as little as four hours. However, you can speak to someone on the phone if there is an issue.
Must have been trading for a minimum of three months and have a £35,000 minimum annual turnover.
You can repay early without penalty.
Loan limit: Up to 500,000. Regulated business loans for sole traders up to £25,000.
Repayment term: Six months to five years
Type of finance: Unsecured loans, merchant cash advance
Time taken for approval: 24-hour approval
Can I repay early? Yes
Merchant Money is a member of the Federation of Small Business (FSB) and a patron of the National Association of Commercial Finance Brokers (NACFB).
You have the choice of financing through a loan or through a merchant cash advance. To apply, you must ensure that your current debt obligations are “affordable”. You must have a minimum of one year’s accounts or six months trading time with a card terminal for a cash advance. You’ll have a minimum annual turnover of £100,000, or £5,000 per month for a cash advance.
Loan Limit: £5,000-£500,000
Repayment term: 12-48 months on Flexiloan; 3-12 months on Flexiloan Lite
Type of finance: Unsecured or secured loans
Time taken for approval: Within 24 hours
Can I repay early? Yes
Fleximize offers both secured and unsecured lending options for both of its loans.
Flexiloan is available for businesses that have been trading for 12+ months. It’s good for those who want flexible, affordable finance for up to four years. It has terms of 12-48 months.
Flexiloan Lite is geared at businesses trading 6+ months, with terms of 3-12 months. It’s best for businesses in early-stage growth phase who need quick access to capital, though more established businesses can also use it as a business loan.
You can apply if you’re a limited company or limited liability partnership with at least four partners, are UK-based with one director living in the UK, you’ve been trading for at least six months and you have a minimum monthly turnover of at least £5,000.
If you’re a sole trader or a non-limited partnership with fewer than four partners, you can apply if you want more than £25,000.
Loan limit: £10,000-£500,000
Repayment term: Two to six years
Type of finance: Unsecured loans
Time take for approval: Typically within 24 hours but can be as little as five.
Can I repay early? Yes
Interest rates starting at 3.9 per cent per year with Funding Circle.
You must have a minimum two years of trading history to get finance with Funding Circle. To apply, you may also need business bank statements for up to eight months and your latest full unabbreviated accounts – profit and loss, detailed profit and loss, balance sheet information.
There are no fees for early repayment.
I’m still not sure if fast business funding is for me
Before you decide on fast business funding, read over some other options, as linked below:
Borrowing money to pay for stock: inventory finance, credit cards, loans and more
Best small business loans in the UK
