Home Business Insights & Advice What are the main types of funding available to businesses in the UK?

What are the main types of funding available to businesses in the UK?

by John Saunders
9th Sep 22 10:26 am

No two businesses operate in the same way, which is why there are so many different types of funding available to businesses. We’ve broken down the primary types of business funding within the UK and outlined the merits of each:

Unsecured loan

One of the most popular ways to achieve business funding is via an unsecured business loan.

Depending on how long you’ve been trading and your annual turnover, Smart Funding Solutions can source loans from £5,000 to £500,000+ with terms from 3-72 months. An unsecured business loan can be used for any business rationale, from paying general business overheads to expanding.

Revolving credit facility

Otherwise known as an RCF, a revolving credit facility works much like a business overdraft. You’ll have an agreed credit line which you can drawdown and repay as often as you like. Some lenders offer interest-only repayments over a certain period and the amount you’re offered will depend on several factors. You can use a RCF to pay outstanding invoices, recruit, advertise and more. Typically, you need to be a UK homeowner to apply.

Merchant cash advance

If your business takes a lot of payments via card, whether that’s in-store or online, there are funders that can lend against your average monthly card transactions with a merchant cash advance. With flexible monthly repayments and no APR, this is fast becoming a popular route to funding. You repay via a % of your future card transactions, usually 10-20%, along with paying a fee to take out the loan. The lender will regularly offer a “top up” once you’ve repaid circa 50-75%. You keep all your cash payments, adding further flexibility.

Invoice discounting

Most businesses have outstanding invoices owed to them, and there are lenders that will purchase those invoices from you, at up to 95% of the invoice value, taking a small percentage until you’ve repaid the advance. It’s known as invoice discounting and this helps free up any monies owed to you – aiding cash flow throughout the business. You have the choice to chase the invoice yourself as normal, or request for the lender to chase the invoice on your behalf, keeping everything confidential.

Asset finance

Purchasing assets to use within your business can be expensive and quickly eat into your cash flow reserves. Asset finance allows you to spread the cost of your asset over a fixed term and agreement, keeping your hard-earned cash in the bank. You can choose to lease the product from the lender by way of a lease purchase, or you can simply spread the whole cost of the asset and own it at the end of the agreement via hire purchase. You can use soft assets (computers, office equipment) and hard assets (cars, vans, machinery) within asset finance, choosing to either pay the VAT upfront – or spread it over your agreement.

VAT & Corporation tax loans

A VAT loan is a form of business financing that allows you to spread the cost of your quarterly VAT returns, in line with your HMRC deadlines. Not only does this help improve cash flow, but it also avoids any penalty fees from late or missed payments. Corporation tax can quickly build up over the course of a financial year, we can offer a 12-month facility, helping to spread the cost over affordable monthly repayments. Both facilities are aimed at improving the cash flow position of the business, helping you to invest money into other areas of your business.

Consider Smart Funding Solutions

The funding options above are just a handful of solutions we help our clients with daily. At Smart Funding Solutions, we have a funding solution for every business owner, industry, and rationale. To find out what funding options are available to your business, head over to our website and fill in our online form to receive your indicative terms within 24 hours or complete our enquiry form and one of our dedicated account managers will be in touch.

 We specialise in providing tailored, commercial finance options for Professions and SMEs. Our team has a wealth of knowledge and experience within the commercial finance market, with access to 300+ lenders, we’ll never fall short when it comes to pairing you with your ideal funder and finance product.

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