Without a Bounce Back Loan, Have You Missed the Boat
Did you miss the opportunity to inject some much-needed cash into your business? The Government’s Bounce Back Loan Scheme (BBLS) closed on 31 March 2020.
The Government launched the scheme to help small businesses and people in business who had no other form of income support, such as limited company directors.
During the pandemic, a quarter of small enterprises in the UK were suffering due to late payments.
Around 1.5 million businesses that were struggling under Covid 19 conditions took out one of these loans. BBLS loans were worth up to £50,000 and fully backed by the state.
But if, for whatever reason, you’ve been unable to get a Bounce Back Loan, is there an alternative to help you raise income and fund your business?
Why Look for Alternatives?
There can be various reasons why you haven’t applied for a Bounce Back Loan.
It might be daunting to add debt to existing business pressures, for instance. Or it could be that you simply haven’t qualified for this type of loan – there were reports of lenders turning down applicants without explanation.
Certainly, the thought of taking on more debt during a prolonged period of economic instability might not be attractive to many SMEs as they plan their routes to recovery.
One alternative to taking out a loan is debt funding, also known as invoice financing.
What is Invoice Financing?
Basically, with invoice financing, you use your unpaid invoices to ease your cash flow.
This is how it works. Rather than waiting for your customers or clients to pay you, a lender pays you the value of these invoice payments immediately.
Then, when the invoices are paid, the lender will release any balance due to you, minus their fee.
Typically, an invoice finance lender can release up to 90% of the value of your outstanding invoices to you straight away.
What are the benefits of this arrangement?
· You get access to cash quickly, as soon as you issue an invoice
· Compared to other types of loans, there’s a fast turnaround with invoice financing
· There’s no risk to your assets
· You can convert credit sales into cash, helping to boost your development.
Is There a Difference between Invoice Factoring and Invoice Discounting?
The main difference between these two forms of debt funding lies in the responsibility for credit control.
· With invoice discounting, you continue to deal directly with your customers when it comes to managing their repayments
· Invoice factoring involves the lender taking on the responsibility of collecting invoice payments. The lender will look at your customers’ credit scores when calculating the fees it will charge you for the invoice factoring service.
What Makes Invoice Financing a Good Alternative to a Loan?
If you’re struggling with cash flow, then speed will be critical. Many invoice financing providers can get you cash that’s tied up in invoices in 24 hours.
If you’ve not met the criteria for a Bounce Back Loan, this won’t necessarily prevent you from accessing invoice financing.
However, it is more suited to helping with immediate cash flow issues rather than large investment projects.
Typically, you could use invoice financing to:
· Buy supplies
· Pay overheads such as rent
· Pay employee salaries.
For startups and SMEs, invoice financing can provide immediate financial support, and give them the breathing the space they need to focus on their core business activities.
How Do You Apply?
The best way to apply for invoice financing is through a trusted expert who will ensure you get a good deal with a responsible lender.
Some of these lenders specialise in specific sectors, therefore it's worth seeking advice about selecting the right one for your enterprise.
Lenders offer flexible packages that will help you stay in control of your finances while maximising the benefits of this solution.
The loan you’ll receive is based on your existing invoices, so you should never be at risk of borrowing amounts you can’t pay back.
You may have missed out on a Bounce Back Loan, but you can still have access to the funds your business needs. Invoice financing is an ideal way to access the resources you need. It can support your post-Covid recovery and growth without adding to your financial pressures.