Businesses require cash to grow their operations. That’s something company founders and CEOs know really well – even when business is picking up, the MarketFinance team writes in a blog post.
UK-based MarketFinance, which is a leading online lender that recently raised £280 million in debt and equity and was approved for flex loans, points out that many organizations turn to external finance “not only to keep the wheels turning, but also to make necessary improvements or fund new strategies.”
Whatever the reason might be, the right or appropriate type of funding may propel your business to “new heights,” the company adds.
They also mentioned that with so many options available, it may be difficult to really know what kind of finance is suitable for your business and “the ambitions you have for it.” A facility that works well for a competitor may not “necessarily work for you too.” The key to deciding what to apply for is “understanding the factors that contribute to needing funds in the first place, and what you want to use them for,” the MarketFinance team explains.
Two common kinds of business finance are “loans and invoice finance,” the firm notes in its blog post.
They also noted that if you are a company or business that sells to other businesses, then you’ll be “no stranger to the gap between invoicing for work or goods and actually receiving payment.” In an ideal environment, you’d issue an invoice and it “would be due and settled that day.” But the reality is that it can take 30, 60 or even 90 days for your customers to make payments.
MarketFinance explains that invoice finance is “a useful financial tool that helps to bridge that payment gap.” An easy way to understand invoice finance is “if you think of your invoices as an asset. They represent money that will be coming into your business,” the company writes in its blog post.
What invoice finance allows you to do is “tap into their value when you want to,” the company explains while noting that essentially, an invoice finance facility “offers you an advance against your existing unpaid invoices.” Typically you “get 90% of the cash you’re owed immediately and pay a small fee to the provider.”
MarketFinance further notes that invoice finance “unlocks your cash flow, fast forwarding the funds you’re owed.”
While commenting on some options, the lender notes that Pay-as-you-go “allows you to decide which invoices you want to get the cash out of.” And it is “handy for one-off or seasonal use. It’s a flexible option to help you get quick and easy access to funds.”
MarketFinance points out that the Subscription is “more cost-effective if you want to fund more invoices regularly.” The company explains that you pay a fixed monthly fee to “use the facility and can access the cash tied up in as many invoices as you like.”
MarketFinance further noted that since invoice finance is based on the value of the invoices a business issues, it’s “only suitable for those that sell to other businesses.” If you operate a B2B then it’s “a very useful tool to boost your working capital and get control over your finances because you know exactly when you’ll get paid.”
MarketFinance adds that a traditional business loan is most likely the “best known kind of finance. It’s an instant cash injection that sets you up with a significant amount of cash up front.” At MarketFinance, they are “accredited for the government-backed Recovery Loan Scheme (RLS),” the company confirms.
Businesses that have been impacted by the COVID-19 crisis may apply for a loan to assist them with recovering even stronger than before. It’s ideal for companies that are “getting back on their feet and have ambitious plans for the future,” MarketFinance notes.
A MarketFinance RLS loan offers businesses:
- £50,000 – £350,000 to support your business over 4, 5 or 6 year terms
- Six months of interest-only payments, so you’ll only start repaying the principal after this period is up
- Competitive interest rates and an arrangement fee capped at 4
- No personal guarantee needed for loans up to £250,000 Find out more about RLS and how to apply here.
If you’re looking for a smaller or more flexible loan, a flex loan “could be the perfect fit.” Similar to a credit card or overdraft, you can “access the cash in a flex loan over and over again,” the company explains.
MarketFinance adds that they think of it as “working capital on demand.” At MarketFinance, they are “offering flex loans between £5,000 and £100,000.” Clients are able to choose to “access the whole flex loan at once, or withdraw smaller amounts as and when your business needs the extra cash.”
As noted in the update:
“The flexible nature of a flex loan also comes into its terms. You can choose the repayment schedule that works best for your business and your available balance will automatically adjust depending on how much you’ve already withdrawn and repaid. And crucially, you only pay for the funds you actually use.”
MarketFinance clients use their flex loans for different reasons, the company notes.
- Purchasing stock – peaks in demand, one-off stock purchases and ambitious large orders are easy to cover when you can dip into the cash you need
- Moving to new premises – if business is growing and you need more space for your team or products then a flex loan can help you get settled
- Upgrading equipment – if you’re modernising or making improvements then you might have some one-off costs to cover. A flex loan helps you make these without forcing you to compromise on your regular outgoings
- Keeping up on staff and operational costs – if you need to hire extra hands or simply feel confident that you can always make rent or wage bills, a flex loan is there as some extra support
MarketFinance adds that there’s a whole host of funding options “available for businesses today.” The best way to decide what your business needs is “to be on top of all your incomings and outgoings.” Once you “understand your cash flow or working capital cycle and where your cash is going you can think about how to boost it.”
In summary, invoice finance is “designed for B2B businesses that want to bridge the gap between invoicing for work and getting paid,” MarketFinance explains.
It’s a good way to manage your day-to-day costs by “taking the stress out of waiting for payments.”
A traditional business loan may be “better suited to businesses that require a larger lump sum of funding.” These are “paid back over a number of years and can help you fund a larger business change or ambitious plans.” And a flex loan “sits somewhere in between,” the company adds.
You don’t need to be a B2B customer, but you can also “decide to take on a smaller amount of debt. It’s the ideal solution to top up the funds your business needs as and when you need to,” MarketFinance explains.
For more details on this update, check here.