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SME Finance

Small Business Finance – What are Your Options

Do you find finance jargon confusing? Don’t worry, you are not alone! Our blog outlines the pros and cons of several popular funding options.

Short on time? Download our complete step-by-step guide to finding the right finance for your business. It’s packed with tips and free advice from our experts at FSB Funding Platform.

Getting a business loan may sound simple, but making sense of the many other types of business finance options out there can be overwhelming, especially if you are unsure which one would be the best fit for your business.

Once you know the time is right and you’ve done all your preparation, it’s time to start looking at your finance options, and matching them to your needs.

Let’s look at some popular business funding options and weigh up the advantages and disadvantages of each.

Coronavirus business loan schemes

As part of the Government’s package to support small businesses and their cash flow during the COVID-19 pandemic, there are two key loan schemes which close for applications in November 2020.

The Coronavirus Business Interruption Loan Scheme (CBILS) launched on 23 March 2020, and is a key pillar of the government’s support for businesses. It offers funding from £50,000 up to £5m and is suitable for established businesses that can demonstrate their ability to meet repayments for the loan level they apply for.

The second scheme, dubbed Bounce Back Loan scheme, aims to simplify the application process and was launched at the beginning of May. There are no fees or interest to pay during the first 12 months. Also, the government has worked with lenders to agree a low rate of interest (2.5%) for the remaining period of the loan. However, if you are accepted for a loan under this scheme, you won’t be able to apply for a CBILS loan later. You can however convert a Bounce Back Loan into a CBILS loan, which is useful if your borrowing needs increase after the Bounce Back Loan was taken out.

Visit our coronavirus hub for more information about national and local schemes, or to get the latest news about how to support your staff during this pandemic.

Growth finance

Looking to expand your business and enter new markets? Whether you’re developing new products, buying new equipment or embarking on new sales initiatives, growth finance can help you generate more revenue and profit.

  • Gives your business the flexibility to take advantage of new opportunities.
  • Invest in new products or services.
  • Meet short term funding gaps, for example customers with long payment terms.

However, you’ll want to watch out for any early repayment fees, variable interest rates and the security arrangement on the loan.

Asset finance

Asset finance helps your business to access the resources you need, like machinery, computers, office equipment or vehicles, with an agreed monthly repayment over a period of time, typically one to three years. Once you’ve paid off the loan, you have different options, i.e. to either own the asset or return it, often in exchange for newer equipment.

  • Great option for businesses that might find it hard to arrange unsecured finance.
  • It can help you to secure assets that may otherwise be out of your budget.
  • Repayments may be tax deductible, and you may want to get advice from your accountant on what this would mean specifically for your business

However, with longer terms, it could be more expensive than buying the asset outright, so it’s worth running the numbers to see if you might have the cash to purchase upfront.

Invoice finance

Invoice finance is a way of borrowing money against unpaid invoices for a fee. You typically receive up to 85% of the value of an invoice immediately, which can help to ease cash flow worries. The funder will collect the money owed from your invoices, and pay you the balance, less any fees.

There are several types of invoice finance, including invoice factoring and invoice discounting, so it’s worth weighing up your options to see which would suit your business best – our funding guide outlines this in more detail.

Whilst it can boost your cash flow and give you greater flexibility with working capital, you should be aware of the potential lengthy contracts, confidentiality issues and Annual Percentage Rate (APR) highs of 48%.

Free guide: Finding the right finance for your business

FSB members can download our free new business funding guide, packed with tips and explanations from the experts to help you decide if it’s the right time for your business to take on funding.

Not a member? Get your copy hereDOWNLOAD NOW


Trade finance

Trade finance is an important external source of working capital finance. It’s a form of short-term credit typically used by companies that export or import goods. It removes the payment risk and supply risk – the exporter gets good sooner, and the importer benefits from extended credit.

  • Finance is typically secured against the goods, or backed by an insurance policy.
  • More time to focus on growth activities.

However, it can be less accessible for newer companies as it’s based on having a good track record of operations and repayments, and can become expensive if repayments aren’t made on time.

Ready to start your funding journey?

Whether you’re looking to grow your business, make investments or support your cash flow, our finance experts at FSB Funding Platform are here to help you any time.

As an FSB member, you can use the service for free and save time with one simple online application, and let our experts handle the rest.

FSB Funding Platform

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