HOW TO FINANCE A BUSINESS EXPANSION

Whether you’re a sole trader, start-up or a growing small business, it’s likely at some point you will need some finance to grow your business or manage cashflow.

We’ve teamed up with Damon Walford, chief development officer at business lender Thincats, for his tips on what to consider when taking out finance...

The first port of call can often be the bank where firms have their business current account, as people think this increases the likelihood of getting the cash. It does not. Small firms are now cutting out banks and going direct to lenders who often provide better rates and are more flexible.

Ask yourself, what are you borrowing for and what is appropriate for your business? Small biz finance is flexible, ranging from overdrafts, covering invoices to debt refinancing.

A loan could be considerably cheaper than a credit card for example. To secure cash, banks will typically only let you borrow against an asset such as property, or require a personal guarantee. Fintech lenders tend to look at cashflow and business growth – so you don’t need to take personal risks.

If you’re looking for something small, such as a business credit card, then there’s plenty of helpful advice/reviews online. If you want to borrow tens or hundreds of thousands of pounds, then you will need professional advice. Banks no longer have the business expertise on the ground. Fortunately, the UK has an exceptional accountancy sector who can help you to find the right finance.

Open banking and open accounting are transforming finance. Alternative lenders don’t have the legacy costs of banks and can make decisions more quickly.

Accounting software permits you to report your incomings and outgoings in real time. This allows lenders to see a true picture of your business, not just relying on historical data.