The government’s Coronavirus Business Interruption Loan Scheme (CBILS) came to an end last month. Although we might not see quite such a sweet deal again, that doesn’t mean SMEs are left without any finance options. There are plenty of other routes you can go down to get the cash your business needs – many of which are much faster than traditional lenders.

Last year, 45% of UK SMEs applied for financial support. This is compared to just 13% in 2019 according to the British Business Bank’s Small Business Finance Markets. Over £75 billion of funding went to 1.6 million small and medium sized businesses under CBILS, much of that through alternative lenders.

If you’re finding it tricky to access funding from a high street bank, alternative lenders can help. Lending criteria trends to be less strict than with traditional banks, making it easier for more businesses to get the help they need. Application processes are generally much speedier too, meaning you can access your cash sooner.

If it’s more flexible and accessible funding that you’re looking for, it’s time to start exploring alternative lenders to put you back in the driving seat. And with the economy reopening and recovery on the horizon, there’s never been a better time to branch out.

The Recovery Loan Scheme (RLS) – it’s not just the big banks

The Chancellor announced a follow-up lending scheme to CBILS in his March Budget. The Recovery Loan Scheme (RLS) is designed to help businesses recover and thrive as restrictions ease. The scheme launched at the beginning of April and is scheduled to run until 31 December. More lenders are being accredited as time goes on, so think carefully about where to apply.

CBILS was brought in to help repair immediate financial difficulties faced by SMEs during the pandemic. RLS, on the other hand, is focused on the future. It’s designed to offer viable businesses extra cash at affordable rates to help see them through the economic recovery. There are no turnover restrictions, so it’s open to more businesses.

While the government won’t cover your fees or interest payments, upfront fees can’t be higher than 5% of the facility size. Like CBILS, there’s an 80% government guarantee to incentivise lenders. RLS will encourage lenders to offer eligible businesses facilities they might not normally be able to access at better rates than usual.

What kinds of facilities are available under the scheme?

The amount you can borrow through RLS is more flexible than CBILS, starting at £1,000 for asset finance and invoice finance. Term loans or overdrafts start at £25,001 (half the CBILS minimum), going up to £10 million. While you’re no doubt familiar with the concept of business loans, the other kinds of finance available through the scheme might not be as clear. Here’s what you need to know:

1. Invoice finance

If you invoice your customers or clients then you’ve no doubt experienced the cash flow pressure caused by lengthy payment terms. Many businesses wait 30, 60 or even up to 120 days before they receive the cash they’re owed.

With an invoice finance facility, you get to dip into that money before your customer pays up. The lender advances your business a percentage of the invoice’s value up front. When your customer settles their invoice, the lender is repaid for the percentage they advanced and you get the remaining amount (minus a small fee).

At MarketFinance we offer several kinds of invoice finance. You can pay as you go if you have less frequent cash flow needs. Or, if you need a more regular facility to support your working capital then you can choose a subscription facility with fixed monthly fees.

2. Asset finance

If your business relies on expensive equipment or machinery, you can avoid payment for the outright by spreading the cost through a hire purchase or leasing. Hire purchasing allows you to make smaller payments over a pre-agreed time frame until you own the asset outright. If you’re leasing the item, a lender will buy the asset and you will pay a monthly fee to use it. When the lease ends, you pay the balance. Alternatively, you can upgrade the item and return the original asset to the lender to settle.

3. Overdrafts

An overdraft is a facility that’s linked to your business current account. It allows you to make payments from your account beyond the available balance, up to a pre-agreed limit. You can choose overdrafts that have a fixed duration for particular pinch points, or you can use a rolling facility. They’re well-suited to businesses whose cash requirements change month-to-month.

Alternative finance supports SMEs

Many SMEs have been let down by traditional banks when it comes to accessing finance. The processes in place to secure funding take a long time to complete and often underserve those who need them most. Alternative solutions that are more user-friendly and faster are out there. For busy entrepreneurs that want a quick response, it’s time to look outside the high street box.