Factoring, Invoice discounting and Asset Finance – Three Pearls of Wisdom

Knowing where and how to raise finance for your business.

Raising Finance

To begin this article, I could regurgitate a string of facts about how many businesses fail within the first three years of trading, but that would be too depressing.

Staying positive, my preference is to focus on the number of small businesses that have managed to get off the ground then find themselves struggling to make ends meet due to the complexities of trying to grow, with limited resources and financial constraints.

From Humble Beginnings

Let me start by being honest, there is no one size fits all solution to the aforementioned dilemma. Each business is as unique as the person who owns it, and in such, financial solutions that facilitate their growth can be equally as unique.

For some, the answer to acquiring sufficient capital to meet increasing overheads costs and demand are bridging loans. Short term finance providing much-needed working capital when cash flow is restricted, is enough to get things going.

However, for other businesses, in particular, those looking to trade overseas, or those suffering from the all too familiar issue of adequate credit control, or more specifically getting customers to pay on time, other solutions such as trade finance, invoice discounting or factoring may be the answer.

Making Your Mind Up

Deciding which financial instrument is best for your type of business or circumstances is no easy task. There are a vast amount of products to choose from, and knowing which one is right for you in the short term and long term, coupled with the wider implications of acquiring either debt or asset finance can prove challenging.

Applying with the first advertiser at the top of a Google search is never a good idea. Finding a reputable financier or the best interest rates take time and expertise, both of which can be luxuries many small businesses simply cannot afford.

Using a trusted and reputable finance broker can help to save time, and provide the added benefit of impartial advice. One of the first things to look out for is if the broker in question is authorised and regulated by the Financial Conduct Authority. This can provide some added comfort in assuring that they follow appropriate codes of conduct and guarantees routine monitoring of day to day practices within the industry. Other good trade bodies include:

  • The Association of Commercial Finance Brokers is a trade body that regulates and represents Commercial Finance Brokers in the UK. Visit their website.
  • UK Finance, formerly known as The Asset Based Finance Association – who take on many activities that were previously undertaken by the British Bankers’ Association, Payments UK, the UK Cards Association,  the Council of Mortgage Lenders and Financial Fraud Action UK. Visit their website.

And Finally

In addition to knowing where to look for a suitable finance broker, there are other characteristics to take into account.

A good finance broker will have a proven background in supporting businesses to raise the capital they need to grow. They are more likely to be independent, willing to listen with keen interest to client needs, and able to provide unbiased advice and guidance when it comes to identifying a suitable lender. They are also more inclined to be honest and open about their own past track-record and rates of commission.

Some brokers may opt to specialise in helping businesses attain a specific type of financial product, such as bridging loans or commercial mortgages for example. Having developed their expertise, they are also able to impart specialist knowledge relating to a wider range of products and services.

Access to key decision-makers helps to move things along at a faster rate, thus saving time and a good broker will have established relationships with key decision-makers who can answer client queries in a more timely manner.

We offer a range of other finance solutions for businesses including:

and much more!

Find out more about the services we provide here at Newable Finance.