Exploring debt finance

Unfortunately, a lot of small businesses starting out can face financial challenges. Over time, these issues can impede progress and expansion. One popular solution to overcome said hurdles is debt finance, which allows SMEs to access funds so they can achieve their business goals.

For small firms, this type of funding is attractive because business owners can maintain full control of their operations – unlike equity finance which dilutes ownership and involves giving away a share of the company in return for investment. To hopefully give you a bit more insight and steer you in the right direction, this article will briefly explore two forms of debt finance: friends and family, and online lenders.

Friends and family

Securing a loan or some other form of debt finance can prove difficult for SMEs that are still in their early stages, simply because a lot of banks and online lenders require months of revenue and cash flow evidence before they make a final decision. This is where friends and family come in handy.

The main advantage of turning to your nearest and dearest for some much-needed capital is that there’s a higher probability for them to be more flexible on repayments and not charging interest. Aside from these important factors, if you fall behind with payments there’s the added benefit of not having to deal with losing any assets – unless such an arrangement is drawn up beforehand.

What’s key to remember here is that, despite the aforementioned plus points, going along this route can strain personal relationships if things start going wrong; sometimes to breaking point. With that in mind, it’s important to be upfront and fully transparent from the off and remind all concerned about the risks involved so as to manage their expectations.

Online lenders

Away from traditional bank loans, the Internet has a whole wealth of new lenders that can fund businesses quicker than other financial organisations, plus, their lending criteria can be more flexible.

Due to the difficulties that a lot of new SMEs experience with getting hold of some money, the market has expanded massively so tracking down good ones can prove tricky.

To help, https://www.money.co.uk’s top two lenders are Nationwide Finance (https://www.nationwidefinance.co.uk/); offering unsecured loans from £6,000 upwards (12-72 months), and Funding Options Business Loan (https://www.fundingoptions.com/) that give loans of £1,000 upwards (1-72 months). 

Your next port of call could be SWIG Finance (https://www.swigfinance.co.uk/). They offer various loan options, including StartUp Loans and small business loans through the South West Investment Fund – read more about them here: https://www.accesstofinancesw.co.uk/news/1651111

Another place worth checking out for free business advice and support – covering Devon and Somerset – is https://www.heartofswgrowthhub.co.uk/.

If you know of any other forms of debt finance then let us know via the comments section.