Been declined by your bank? It isn't the end of the world!

Andy Grantham regularly blogs about business finance solutions for SMEs and small businesses

A recent survey concluded that 55% of small-to-medium sized enterprises (SMEs) have been refused bank funding in the last six months, whilst 80% also indicated that alternative forms of funding hadn’t been suggested by their bank managers.

This is a staggering statistic and proves there remains not only a reluctance by the banks to lend, but more importantly a general ignorance of other ways SMEs can fund their businesses.

Traditionally, banks have provided the bulk of business funding packages with conventional loans or overdrafts. Unfortunately such facilities are much more difficult to obtain these days as banks try to rebuild their own balance sheets and reduce further bad debts by tightening their credit policies.

Add to this the problems caused by the SME’s own customers delaying payment of invoices, even when the work has been done, or demanding extended credit terms, and it's no wonder the poor SME can often be left with a real cashflow gap.

Business owners need to be aware of the alternatives in the marketplace, which in many cases can provide significantly more funding than historic routes.

An alternative - Invoice Finance

One such funding option is invoice finance. An invoice finance company can advance up to 90% of the value of outstanding invoices within 24 hours of the invoice being raised. This has the effect of accelerating the cashflow in the business and reduces the need for reliance on bank funding.

There are additional benefits an invoice finance facility can also provide:

  • It generates more cash than an overdraft – usually twice as much.
  • Less personal security is required meaning there is no need to put up your home as security.
  • The facility is linked to your sales, not your historic balance sheet and will therefore grow with your business - meaning you don’t have to keep going back to the bank asking for more!
  • It’s not based on historic balance sheet performance and therefore is suitable for businesses in a turnaround or highly geared.

If you would like to find out if an invoice finance facility might be the answer for your business, why not call one of our experts for a no-obligation chat on 01756 694933.