Alternatives to a business overdraft

It is a tough market place for businesses to trade in these days both from a perspective of attracting new business and funding the contract from cash flow. Traditionally, for those businesses without sufficient liquid funds, they would often arrange an overdraft facility but this option is becoming increasingly difficult as the major high street banks have tightened up their lending policies. However, there are alternatives to a business overdraft that you may not be aware of that could inject some much needed capital into your business. Here at Choice Loans, as an independent broker, we are increasingly arranging more types of finance that doesn't reply in traditional bank loans.  So, let's have a look at some of the alternatives to a business overdraft: - Invoice Finance   Invoice finance includes things like Factoring and Invoice Discounting with both types of scheme proving increasingly popular alternatives to that of a business overdraft. There are several benefits with Invoice Finance such as: -

• As your business expands and your turnover grows the level of funding increases with it which is often not the case with an overdraft facility.
• Within a day or two of issuing an invoice you can receive anything up to 90% of the amount of the invoice.
• Your billing cycle is not as long.
• Your credit rating may be improved.

• In the case of Invoice Discounting your debtors need not be aware that you are involved in Invoice Finance.
• With Invoice Discounting you keep control of your debtor book whereas with Factoring it is outsourced.

Some of the criteria for Invoice Discounting are that your business must be located in the United Kingdom and have a minimum turnover of £500,000. For Factoring, you must have a turnover of £50,000 plus. Your invoices must provide payment terms of between 14 to 90 days. To find our more see our Invoice Finance page here. Merchant Cash Advance A merchant cash advance is one of the least known alternatives to a business overdraft. If your business offers its customers the option to pay by debit/credit card and can show the trading history of the card machine over a minimum period of 6/12 months then you may qualify for such an advance. As a general rule, the maximum that you can take as a cash advance equates to the card machine's average monthly turnover and the funding can usually be made available within a few days. The minimum loan is £3,500; max is £500,000. No security, accounts or credit checks are required although you will need to provide 3 trade references and have at least a year left on your lease. Repayment is made as a percentage of future transactions through the card machine usually in the range of 10% to 20%. A merchant cash advance is certainly a quick way of raising finance with little formality being required. For more information see our Merchant Cash Advance page here. Asset Finance An excellent way of funding the likes of plant, machinery and vehicles is by way of Asset Finance with as much as 90% of the purchase price being made available with the asset providing the security although the liability is not repayable on demand as an overdraft facility is. The interest rate is usually fixed enabling you to budget with certainty and repayments are over either 3 or 5 years meaning that you can periodically replace the item. Interest payments can be offset against tax. For more information see our Asset Finance page here. So, as you can see, there are a number of alternatives to a business overdraft. If you require more information either link to the pages in this article or call us on 0845 1260350.