Gone are the days of going cap in hand to the business banker clutching armfuls of finger in the air financial projections produced, at cost, by your accountant.  Gone also are the days of waiting interminable amounts of time jumping through endless banking hoops whilst our “local” banker presents funding cases to far flung decision makers.  Gone are the days of being forced to proffer more and more personal security to support the funding requests of a growing company.

With the SME denied the help of traditional banks, largely due to the outcome of the 2008 crash and the impact of the Basle Accords on bank liquidity ratios, but with demand for vital sources of working capital still there, the number of alternative finance providers ready to plug funding gaps has grown apace.

Businesses come in all shapes, sizes and hues and, as a consequence, every business has its own unique funding requirements.  Alternative finance providers have emerged to focus on specific segments within the SME funding mix.  This is great news for the SME exploring its funding options, but the myriad of potential solutions does create its own challenges and the plethora of new players delivering multiple options can make it somewhat overwhelming for the uninitiated to tread a well planned path through the maze of new finance providers.

In an unstable economic climate banks are less likely to lend – especially to risky business investments. In today’s unpredictable financial market, it is becoming more and more difficult to get approved for a bank loan, which is why the trend for alternative finance solutions keeps on growing. Without these alternative funding options, many businesses would have ceased trading or would-be successful property investors wouldn’t have been able to buy a second property.

In 2014, a record £1.74 billion was raised through alternative finance models. So isn’t it time you found out more about it?

Advantages of Alternative Finance

Many alternative finance solutions are ideal for SMEs or start-ups, not just because they will struggle to receive traditional funding, but because they can also benefit from better terms.

• Ease of application
• More chance of guaranteed acceptance
• Flexible funding and repayment options
• More favourable terms for the business

Read on for a comprehensive guide of the commercial finance services available.

Types of Alternative Finance

There are many different variations of alternative finance, and it’s crucial to choose the right model for your business. There’s also hundreds of different platforms to apply for alternative finance depending on which specialist funding you choose. Some brokers will specialise in all types of alternative finance. Here is a basic rundown of some of the most popular alternative finance solutions.

Business loans

Whether you need a short term cash injection to cover the costs of staff wages and stock, or you’re investing in a new business premises, a business loan could help. An alternative finance provider can raise finance for business owners without the traditional application process at the bank which can take weeks to approve.

Bridging finance

Need to raise some capital at short notice? With bridging finance you can have the cash in your bank at very short notice, to buy a property at auction or solve your cash flow problems before a large payment is to be made. Bridging loans can be up to £20 million but need to be repaid within 12 months so this is a short term option.

Invoice finance & invoice trading

Many SMEs have a cash flow problem because invoices take too long to be paid and there are constant outgoings to pay. With the help of invoice finance, businesses can release the cash straight away to be used elsewhere and keep money running through the organisation. This type of finance is fairly low risk because you won’t be borrowing any more money than you’ll have coming in.

The time when a company was obliged to hand over the whole of its debtor book to a factor or invoice discounter is long gone as is the time of restrictive contracts from which it is prohibitively expensive to escape.  For companies trading on credit terms with their customers, it is now possible to sell invoices on in a selective manner, entirely at the SME’s discretion, to a pool of individuals or institutions again through a funding platform. Funds are then received immediately to a pre defined percentage of the invoice’s value with the balance less fees being received at invoice collection delivering instant cashflow from working capital tied up in unpaid invoices.  Structures also exist that enable 2 or 3 year loan arrangements, either fully amortising or bullet repayment, driven by the value of the SME’s debtor book.

Peer to peer lending & crowdfunding

Peer to peer lending is an attractive alternative finance solution for commercial borrowers. In most cases you’ll receive a better interest rate and it works the same as a traditional loan – the only difference is you’re lending from individual investors rather than a financial institution. Banks aren’t the only financial institutions with large sums of money to lend. Wealthy individuals can be matched with small businesses to offer an alternative source of funding with more flexible terms.

Debt transactions between individuals and/or institutions facilitated by a platform.  Many individual contributors make up the sum ultimately borrowed with terms between 6 months and 5 years typical. Interest rates can vary from as low as 9% or as high as 18-20%, dependent on the quality of the proposal.  Funds can be delivered in a matter of a week or so in some instances with potentially very little in the way of business plans/budgets being required.  With many platforms in the market, it is essential to work with a platform that will accept the credit risk of your business and present your funding proposal to potential lenders.  If going down this route, do your homework as the character of each platform is very different…

As implied, the sale of a proportion of your business to a number of individual and/or institutional investors in return for investment.  Again, there are a number of platforms who facilitate these types of transaction and they each are different in nature and what type of deal they are looking to propose to their investor base.

Asset finance

There are many different types of asset finance, and this solution works well for industries such as farming where businesses have expensive equipment to purchase and maintain. Business owners can free up cash in their assets to use elsewhere, or spread the cost of machinery over a length of time. Secure a comfortable loan by lending against company assets such as machinery, vehicles or equipment. It is a way to release cash tied up in business assets for you to use elsewhere.

Pension Led Funding

A good pension is a valuable asset which can be used to secure an alternative business loan. Mechanisms which allow SME owners to use their pension funds to invest in their own businesses within a HMRC approved and potentially tax efficient environment.

Merchant Cash Advance

Take card payments as part of your sales? If so, you could benefit from a merchant cash advance. This is an innovative funding solution which is related to your monthly turnover in card payments. You repay the funder through a percentage of your daily card receipts so it a short term solution reducing the chance of long term debt.

Interested in the benefits of alternative finance solutions but not sure which lending option is right for your business? Well you’ve come to the right place. Here at Genie Lending we specialise in a variety of alternative finance options which can be tailored to your business needs. From short term and long term loans, secured and unsecured business loans to commercial and buy to let mortgages, we’re guaranteed to have a suitable option.

Updated: May 2018

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Many companies opt for a commercial bridging loan because they can be arranged in a very short amount of time compared to other types of finance. They are also available up to very large amounts – up to £20 million from private and flexible lenders. Short term bridging loans are available to individuals or businesses, but are generally used for the same purpose.

In today’s uncertain economic market, it is likely that most small businesses will experience hardship at some point. Cash flow is a major concern, as sometimes bills are going out before your clients have paid their invoices. It’s difficult to balance the books, and to keep the business going you may need to consider applying for finance.

Lots of companies depend on loans and other alternative finance solutions to keep them afloat. Most of the time it’s their only option to stop the business going bust or to keep up crucial payments. Sometimes these difficult times are out of the control of the business, it is often external factors which influence their position. However, you need a good back up financial plan to get you out of the red and into a safe place while the market improves. A bridging loan could be the answer.

What is a Bridging Loan?

The name of this loan is based on imagery – think of a bridging loan as a temporary financial bridge, to keep the borrower out of water until they can pay the money back. Bridging finance is a short term loan, up to millions of pounds, which is usually secured by against property.

What are the Advantages?

As a secured, short term loan, bridging finance can be arranged very quickly. This makes it ideal for property investors or anybody looking to buy a property at auction or looking to renovate a property for resale.  Bridging loans are typically paid back between one and 12 months, which is why they are often used in buying and selling property.

However, businesses can also benefit from bridging finance if they need help with cash flow and are expecting a large chunk of income in the next year. For example, businesses with a seasonal sales fluctuation may require some extra cash in the winter, but know they will be able to pay it back in the summer when sales increase.

Bridging loans are a simple way to take advantage of short term opportunities. They are also relatively easy to be accepted for, as they are a quick loan with no credit checks – often a logical choice for lenders who have been refused for other types of loans. However, you must make sure you have a strong repayment plan in place as it can become difficult to repay the loan in such a short amount of time.

What can a bridging loan be used for?

Generally, because bridging loans are a short term finance option which needs to be repaid within 12 months, they are used for property development or purchases. For example, if you want a quick sale of a property or need urgent funds for repairs or renovations, a bridging loan could help. Most people don’t have large sums of money saved up for property investment, but taking out a traditional loan can take too long in the property chain. To take advantage of investment opportunities, sometimes bridging finance is needed.

Bridging loans are a great option at auctions and lots of buyers complete purchases with bridging finance. A typical loan from a traditional lender would probably take too long for someone who wants to snap up a property at an auction.

Another option is property investment for a quick resale. If a buyer wants to make minor improvements and then put the property back on the market to sell within 12 months, a bridging loan can assist with the initial purchase.

What happens at the end of the term?

Before taking out a bridging loan, it’s important to understand the implications of such a short term loan. The finance term usually ranges from one to 12 months, and there will be security set up on the loan if you don’t repay it in time. There will also be a lump sum of interest added at the end of the loan to take into account.

There is another option – at the end of the loan, you can convert the bridging finance to a commercial mortgage if you have used the cash for a business property. This gives borrowers even more opportunities for repayments and further investments.

If you’d like to find out more about bridging finance and how it could help you, speak to our professional brokers.

Updated: 3rd April 2018

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The slowdown in growth is usually seen as a negative thing, as homeowners will lose out when selling. However, a fall in house prices can create an interesting prospect for the entrepreneurial opportunist. If buyers move fast, they can take advantage of low house prices before they are predicted to start rising again.

Halifax, Britain’s largest lender, released its figures for June showing property prices were falling fast. UK prices fell 1% in June, which is the largest drop since January. It is the third month in a row in which figures have fallen, and that hasn’t happened since 2012. According to Halifax, growth in house prices is now down to 2.6% in June – the lowest increase in four years.

The evident slowdown is particularly evident in London, where house prices are inflated compared to the rest of the UK. In fact, over a third of properties on the market in July slashed their asking prices according to research from HouseSimple. So is now the time to invest in a property or two?

Falling House Prices: An Opportunity?

First time buyers are happy at this news as it means they might actually be able to get onto the property ladder at last. However, commercial buyers and investors could also capitalise on falling house prices. A reduction in prices means buyers get better value for money, however more owners may hold onto their property for longer to see if they will be able to get a higher price in the future.

A fall in property prices can be a perfect business opportunity – but you’ll have to act fast. You never know which way the market will swing, so you could end up paying thousands more even by pushing back your search a month or so. If you find the ideal property at an ideal price, be sure to secure funding from a lender who will pay out in good time. If a mortgage application takes too long or is refused, then the seller will look elsewhere. If you want a quick transaction then sometimes it’s acceptable to apply for bridging finance instead, which is paid out at short notice. Once the short term loan needs to be paid off, you can convert it into a mortgage if needed.

Do you want to see what property opportunities are waiting for you? Speak to us today about commercial mortgages and bridging finance.

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