Small Business Finance: What you need to know
Small Business Finance: What you need to know

If you’re a small business, the thought of managing small business finance can be a daunting one. But with our clear, useful and practical guides, taking that next step and investing in your business is easier than you might think. With our articles covering every aspect of small business finance, you can soon be an expert in making your business profitable, and getting things off the ground, by using the best finance solutions for you.

There are 5.8 million small businesses in the UK.

8 out of 10 loan applications by small businesses are approved in the second quarter of 2019.

£12.2 billion was lent to small businesses in the first half of 2019.

Businesses in London and the South East received around 40% of all SME loans.
This section covers everything from the various sources of small business finance, through to the different ways to finance your enterprise. Our expert guide provides the foundation you need to understand, utilise and plan for finance without all the complicated jargon, difficult-to-understand information, and legalese. We provide guidance on a variety of different topics, and bust the myths surrounding small business finance, to ensure you’re getting the most for your money.

Comparing sources of finance for small business

This article takes a look at the best small business finance , including the most common methods of funding such as banks, lenders and the government, as well as a range of alternative methods of finance that you may be considering for your business. We dive into the various differences between each form of funding, from online crowdfunding to credit unions, and offer insight into what would be a good fit for your business.

The purpose of this article is to provide you with a little extra knowledge surrounding the different forms of small business finance available. By comparing and contrasting the services offered in a simple and clear way, it’s easier to see what source of small business finance is the best fit for your specific needs. Every business is different, so one-size-fits-all certainly isn’t the best approach when it comes to meeting your financial needs. Other sources of finance covered include alternative finance lenders, supermarkets, peer-to-peer lenders, merchant cash advance companies, online-only lenders, and even lending through friends or family.

Click through to find out more about the different sources of finance available to small businesses, and to figure out which is the right choice for you.

Ultimate guide to finance for small business owners

This article provides tonnes of knowledge for small business owners considering the challenges of finance. You could even call it the ultimate guide to all things finance. A range of different topics are covered clearly in this guide to provide you with the best possible overview, especially when it comes to your needs surrounding finance from any source.

This comprehensive guide covers everything from the challenges small business owners face with money management and cash flow, to the need to diversify to prevent dependence on a small group of clients. We also cover founder dependence, in addition to the tax requirements of small businesses, plus factors such as compliance and regulation with schemes like GDPR. For those looking to learn more about how the economy impacts small businesses, we cover that too,as well as how to remain competitive in your chosen market.

Read more to discover the requirements and considerations every small business should know, from sources of finance to cash flow. With our ultimate guide, we provide insight into the basics you need to know before seeking small business finance UK.

Obtaining finance for a small business

One of the first challenges that small business owners face is how to obtain the finance they need to expand, improve or even start their small business. This article takes a closer look at how small business owners – or those considering starting their own business – can find finance, through a variety of online and offline sources that are suited to small businesses in particular. We answer the most commonly asked questions to provide insight into the actual process of obtaining finance, from research to approval.

Within this article, we examine the various places small businesses can go to find finance, including comparison sites, direct to lenders, online, banks, alternative finance and more to provide a clear overview of the different options available to business owners. We also cover the pre-approval process and what it means, as well as the requirements for a small business to be approved for finance, and how companies can improve their chances over time.

Read on for more in-depth information about the process of obtaining small business finance, including the pre-approval and approval processes required to get the finance you need.

Alternative finance

For small businesses looking beyond the typical methods of finance, alternative finance might be a viable option. For those new to the concept of alternative finance, this article provides a compact overview of precisely what alternative finance is in relation to small businesses, as well as answering a variety of other commonly-asked questions that may come up in the financing process.

This article discusses everything from the basics of alternative finance, including what it covers, in addition to guidance on funding your business through alternative finance. We also take a look at the bigger picture when it comes to financing in the UK, examining why exactly alternative funding is a must for this country as a different source of small business finance. Finally, we go over some of the critical points of the alternative finance model, to provide a full overview of alternative finances as a whole.

Click through for more insight into why alternative finance funding might be the best choice for your business, and how to access or use alternative finance to help your enterprise develop and grow.

23 ways to finance a small business

This ‘big picture’ article gives readers an excellent overview of the wide range of different ways a small business can be financed. It offers information on just about every type of financing available to benefit, improve or expand your business by a variety of different means. We cover 23 different small business finance methods, with a brief description and analysis of why each different type of funding might just work for you.

The wide range of finance methods include financing a small business through friends or family or personal savings, as well as more formal approaches such as bank loans, credit cards, and business overdrafts. The variety of small business finance options also includes other practical options such as applying for government grants or even utilising investors. It also outlines various lifestyle changes that can help to finance a small business or start-up, such as keeping a job, selling assets or working on the side.

Click through to find out more about the various ways in which a small business can be financed, from small-scale options, to more expansive suggestions suited to start-ups and small businesses in just about any market or industry.

How to finance a start-up business

Unlike a typical small business, a start-up firm or company typically has more overheads and financial requirements attached to its setup,and a higher level of risk required for its success. This article clearly explains the needs of start-up businesses when it comes to sufficient financing, as well as taking a good look at the struggles related to setting up a brand new company from the ground up.

This indispensable guide to financing a start-up business offers insight into the various requirements, processes and options available. These methods include bootstrapping, in which the company relies on internal investment or revenue, as well as financing through friends or family as a viable alternative to more traditional and costly, financing methods. We also take a look at the concept of angel investors and accelerators, and how these specific financing types can help start-up businesses.

Find out more about the various finance options for start-up businesses, including the use of angel investors, accelerators and bootstrapping in the process of setting up and financing a business in the short and long-term.

How to finance a small business purchase

Beyond the initial set-up costs of a small business, many people take the option of purchasing an existing small business, acquiring greater stability and a pre-existing system and customer base.. This article examines the process for financing the purchase of an existing small business, and how to decide on that purchase in the first place.

This guide provides information on the full process of financing a small business, from the identification of an appropriate business or company to purchase, to the best way to evaluate a potential purchase prior to instigating any financing processes. We also cover the various advantages of buying a pre-existing small business over creating your own from scratch. For individuals considering whether purchasing an existing small business is worth the investment, this article covers it all.

Keep reading to find out more about the various options available for those considering purchasing an existing business, plus some extra guidance on why purchasing an existing business might be the ideal alternative to starting fresh for many would-be business owners.

Understanding working capital finance

With so much jargon surrounding the process of running a small business, it’s no wonder finance can quickly become confusing to decipher. This article specifically covers the world of working capital finance, from what the concept actually means to the various different types of funding that fall under the ‘umbrella’ of small business finance. This guide aims to explain it all, providing the insight needed to make working capital finance easy.

Differing from more traditional investment loans used to expand or improve on a small business, working capital finance is for the specific purpose of providing funding for everyday operations and requirements.. We include the definition of working capital, plus the various sources of finance, such as trade credit, bank overdraft, letters of credit and purchase of bills amongst others to provide a full overview of not only what working capital finance is, but also how it works.

Click through to discover the advantages of working capital management and finance for the purpose of small business, and how this form of finance differs from other types of financing for small businesses.

Merchant finance

There are many types of businesses out there. One of which is merchant businesses, companies which accept transactions and payments directly from customers, resulting in far more substantial cash flow both in and out of the business than many other types of small business. This article takes a closer look at the financing options specifically available to merchants.

Unlike other small businesses, merchant businesses are unique in the type of finance they require. We take a closer look at what merchant finance is, plus how it works for the more extensive requirements of a small business. We also define the various sources of funding for small merchant businesses, including merchant cash advances, to provide a clear overview of how companies of this type can finance growth, expansion or even working capital.

Read on for further guidance on merchant financing compared to funding for small business, plus a further explanation of the best business finance merchant businesses can access

Small business finance calculators

Considering what the best finance option for your small business is? Our concise, comprehensive small business finance calculator provides instant insight into the best options for your business. Use our calculator today to discover if your business is eligible, or suitable, for specific finance methods, or to plan ahead for future growth and business development.

Our small business finance calculator is also a useful tool for individuals considering investing in a small business for the first time, providing more insight into the finance options available., Our calculator is a practical solution for small businesses of all sizes and types.

Click through to our calculator to learn more about the best finance options for your small business, based on up-to-date information and accurate calculations.

Find out if you are eligible
Small business loan providers
Small business loan providers

Small business loans are a great way for an SME to get an invaluable cash injection. But who actually provides them? It’s all well and good knowing what small business loans are,but it’s also important to know where you should be looking for them. Here you’ll find everything you need to know about small business loan providers and the application processes.

This will give you everything you need to make a successful loan application, and take the first step towards the next stage of your business’ growth.

Who provides small business loans?

There are a number of financial institutions which provide small business loans. They all have their own individual ways of structuring their loans, with unique application processes and requirements you need to satisfy before approval. You can get financing through the government, banks and credit unions, finance brokers, peer-to-peer lenders, as well as through alternative finance specialists like Capify.

Capify’s small business loans

Unlike banks, which usually require at least two years of business records, Capify only requires small businesses to have been in business for six months. Our loans are tailored directly to the needs of small businesses and can be just what you need to give your business a quick cash injection.

We lend to all sorts of small businesses, operating in all manner of industries.Every small business needs financial assistance now and then, and Capify is here to provide it.

Direct small business loan providers vs brokers

Direct lenders operate as a single institution – you apply to one company that assesses your application, and if you’re successful you get the funding from them. Brokers will take your details and then reach out to multiple lenders on your behalf. The benefit of a broker is that you only make one application, rather than to each individual lender. A drawback is that often brokers will place you and your business with the lender that provides them with the largest commission.

Find out if you are eligible
Eligibility for a small business loan
Eligibility for a small business loan

Like all loans, small business loans aren’t given out to everyone who applies. There are certain requirements you need to satisfy before you’ll be approved for the loan. They vary from lender to lender, but there’s general criteria that applies to most. Knowing them means you can make sure you’re able to satisfy them before you apply. Ultimately this saves you time and effort, meaning you can get your small business loan paid into your account that much faster.

What is the eligibility criteria for a small business loan?

Eligibility varies depending on the type of loan, the amount you’re applying for, and the way the specific vendor operates. Some examples would be turnover/profit data, recent bank statements and filed accounts. An overview of your trading history might be necessary, as well as any information about previous debts or county court judgements (if applicable).

You may need to provide evidence of what you intend to use the loan for, as well as a proposal for how you’ll make your monthly repayments. A form of collateral will need to be provided for a secured loan,with valuation and proof of ownership.

This is just a general overview. Check with your loan provider for their specific requirements before you apply to make sure you’re eligible.

How affordable are small business loans

Affordability is subjective, and discussed more thoroughly in our detailed article. A number of things affect how “affordable” your loan will be. First, is what you can afford to repay. Then you need to consider how much money you need to borrow, and over what sort of time frame.

If you have any concerns, it’s important that you reach out to your proposed lender before you apply for a loan – they will be able to give you more specific advice. Depending on your circumstances they have a more appropriate path to small business finance to offer you.

Understanding loan credit checks/scores

It can be intimidating trying to understand what you need in order to have an “acceptable” credit history,but remember that most lenders will not deny you a loan for no reason. In fact, credit rating is almost never the sole reason for a loan application being accepted or denied.Even if you have a bad credit history, many lenders may still consider your application in the right circumstances.

Remember, if you’re a sole trader your personal credit will come into play as your finances are not considered separate from your business finances, like they would be if you ran a Limited Company. Your business credit will be thoroughly checked, but if you have any doubts it’s best to be upfront as soon as possible.

What if you’ve been declined for a loan?

It can be demoralising to go through the rigmarole of the application process only to be denied, especially if your business really could use that cash injection. It’s important that if you are denied you understand why.This will prevent you from making multiple applications that are denied for the same reason.

If you’ve been declined for a loan, remember that it doesn’t prevent you from applying for another with a different lender. For example, if you’ve been declined by your bank because you don’t meet their more stringent criteria, you can still apply for business financing through Capify,You could meet our more achievable requirements.

Find out if you are eligible
Applying for a small business loan
Applying for a small business loan

Now you understand more about the various types of lenders that can offer you a path to small business financing, and you understand the sorts of things they’re going to look for when you apply, it’s time to consider making the application. It can be a daunting prospect, but provided you have some understanding of the process, it’s relatively simple.

Do your best to be as prepared as possible before you apply. Have all your information to hand to make it as quick as you can. Here’s what you need to know.

The business loan application process

Before you start your application you should think about how much money you actually want to borrow. If you are using the money for something specific, make sure you’ve properly costed it. You should also be familiar with what you can realistically afford to pay back. Remember that you need to take into account potential interest rates, depending on the loan you choose. Investing the time making sure you know exactly what you need will prevent you from over or under-borrowing.

Applying for a small business loan online

Applying for a small business loan with Capify is easy. Use our simple Quick Quote tool to get the ball rolling – you could be pre-approved in minutes!

Where can you find a small business loan?

Direct lenders like Capify, can offer you a quick decision and fast payout, but you will have to make your applications one at a time if applying to multiple lenders. Brokers can allow you to choose the most appealing deal, but their broad-stroke searches may miss out key information. A government grant can offer very favourable rates of repayment, however, they may be earmarked for very specific circumstances so have more stringent requirements in the application. Banks, building societies, and credit unions may not be suited for new businesses who can’t provide proof of at least two years in business, however, if you do satisfy their application process you could potentially borrow a larger amount of money.

How long does it take?

It depends entirely on the nature of your loan and the way your lender operates. The actual application can often be done in minutes if you have all the right information to hand. If applying to a bank, it might take several weeks to be processed. Smaller direct lenders may be able to process your application in around a week, depending on their workload. Certain vendors, like Capify, will aim to have your application processed and your loan paid out in as little as a few days.

What do you actually need to apply?

As always, the specifics will vary depending on the loan and your provider. But it’s a good idea to make sure you have a business plan, give some idea about what the money is going to be used for, and present accurate, up to date costings where possible. You should also provide links to your online presence, including your website, social media feeds etc. Many lenders use these to establish your business’ standing, see how you interact with customers, and if you have consistently positive or negative reviews.

You should have your financial documents ready, – including bank statements, filed accounts, receipts and invoices, etc. Anything to give your lender a picture of your business’ recent and current financial health. Proof of your time in business will be necessary. You’ll have to provide different proof depending on the lender, but if you’re applying with Capify you’ll need to demonstrate at least six months in business.

If you have any history of debt/judgements/warrants or any other evidence of a chequered financial history, present these as well. It’s important to be honest. You’re far more likely to be successful if you’re as truthful as possible than if you try and hide things you think will count against you. If you have collateral to offer as a part of a secured loan, you should prevent a thorough description of it along with a current valuation and proof of ownership.

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