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Top tips for accessing finance – a guide for UK SMEs

10th Sep 2018   ·   Dave Sherrington   ·   Insights

The UK’s rapidly expanding small business sector is something of a sleeping giant, with young companies in need of better access to finance to kick-start their growth. In the transition from start-up to scale-up, a critical factor for a growing business is the quality and flexibility of available funds.

In this regard, early-stage start-ups are reasonably well catered for, but once they look to pass the development stage – with a viable, revenue- generating concept and sustained profitability assured – business owners struggle to raise capital to fund business growth.

There are a number of reasons for this – a fear of debt, for example, or a reluctance to give up equity. Quite often, though, it is simply a lack of awareness of the range of available funding options that are out there.

SME performance is fundamental to the success of the British economy, and will be critical in bolstering a strong and competitive domestic economy post-Brexit. Certainly, business owners and finance directors keen to explore new business opportunities in the months ahead must feel confident that they have access to the right financial support so that they, and the rest of the country, may thrive.

At various stages within a company life cycle, investing in new services, additional products or new staff is invariably necessary, however accessing funding for these critical requirements can be concerning. Business owners today face additional challenges as many traditional financial institutions, under increasing pressure to tighten lending criteria, remain reluctant to support certain sectors with new and additional refinancing requests.

In fact, this summer, the government announced yet more plans to encourage bank lending to SMEs, such was the concern that UK businesses should receive necessary support when Britain leaves the EU. With this in mind, here are our top tips on how to gain access to the finance your business may need:


1 - Showcase your USP –talents, technology and depth of knowledge

You are operating in a competitive environment, regardless of which industry you’re in, and against a backdrop of legal and government policies. Lenders and investors will be looking for you to show that you know what’s happening in your industry, what trends are emerging, and what you’re doing to stay at the cutting edge.

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2 - Illustrate the strength of your cashflow

With late payments on the rise, SMEs increasingly rank cashflow as one of the more serious worries they are facing. Illustrating the strength of historic and forecasted cashflow is arguably more important than even your credit score. This is because the latter is a static concept, whereas cashflow gives a strong indication as to your sustainability and potential direction of travel – and with growth comes an improved score.

ThinCats, for example, would want to see a two-year track record in which the business has generated cash flow so they can prove they can service the debt. You also need to demonstrate that you have a strong management team that is striving for continual improvement. If you stand still in today’s society you fall behind your competition. You also need to demonstrate your financial commitment to the business by showing that you have invested your own capital into the business in the first place.

3 - Think outside the box – consider the alternatives

Across the UK, almost 3,000 bank branches have closed since 2015 or are due to shut this year, according to consumer body Which?. That equates to almost 60 per month and means you must consider more than just your high street bank when seeking finance. A vast array of alternative business funding options have evolved in the wake of the financial crisis, offering different ways to raise funds for your new business. These range from Government-backed schemes such as the British Business Bank, through to crowdfunding and the more flexible alternative finance providers like us, Funding Circle and Growth Street.

To summarise, whichever form of finance you choose, it is vitally important that you have a good professional advisor to help you navigate the multitude of debt providers in the market. Today, if you were looking to take on a business loan you could be looking at around 30 options. You have to present yourself in the right way and secure the best chance of gaining the support. Our model is one in which we purposely correlate relationships with financial intermediaries that are representing the borrower, it’s so important to give yourself the best chance of securing funding for the business. ​​

About the author

Dave Sherrington, Regional Head of Sales

Dave has spent his career building relationships and securing new business. Working within the financial services sector his entire career he has spent time growing entrepreneurial SME businesses and leading sales teams for multi-national banks. His recent focus has been centred around fundraising for SMEs enabling them to fulfil their ambitions of growth and productivity in a benign lending environment.

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