UK BUSINESS FINANCE FAQ

As a small business, what areas of finance should I know about?

As a small business, it is vital that you have an appreciation of the key areas of finance. Areas which you should investigate include factoring, invoice discounting, business funding, asset finance, commercial property loans, cash flow, UK Goverment grants, UK Goverment loans and European funding.

What is factoring?

Factoring is the process whereby a factoring company buys a business' outstanding invoices. Basically, factoring is short-term lending that is guaranteed by giving the lender (the factoring company) the right to collect your revenue from a customer you have invoiced.

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What does a factoring company give the business in return?

In return, the factoring company gives the business 90% of the invoice value up-front then collects the full invoice amount from the debtor, taking the 90% and their fee and handing the business the balance.

Factoring offers a business almost immediate access to finance, typically the factoring company will give the business 90% of the invoice they have raised within a 24 hour period.

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What is invoice discounting?

Invoice discounting is similar to factoring in that you can get an advance on your invoices but unlike factoring you can still handle the invoice process. To qualify for invoice discounting, however, a business must have an annual turnover in excess of 250K.

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What UK funding options are open to a small business?

A number of funding options are open to a small business in the UK.

Two of the most typical funding models are grants and loans:

Grants - to a small business, a grant represents non-repayable financial assistance. Generally, a grant is awarded to a business to encourage them to undertake or continue activities which, without funding support, they would be unable to undertake, alternatively, a grant is awarded to persuade a business to refrain from specific activities. The main difference between a grant and other funding models is that the decision to award a grant is made without the need for direct commercial gain

Loans - a business loan works in exactly the same way as a personal loan, the only difference is that it is the business doing the borrowing, not the individual. Business loans are used for a variety of reasons, including starting a new business, purchasing an existing business or refinancing an existing business. Whether it is to alleviate cash flow problems or fund future activity, a loan can provide a business with instant funding.

In addition to the private funding sector, grants and loans are also available from the public sector (UK Goverment, European Commission, European Union, etc).

Find out more about UK small business funding

What is asset finance?

Asset finance allows funding to be secured against business assets such as debtors, stock, machinery and property. Because asset finance is secured against existing assets, positive trading and a £1 million turnover, asset finance is method of raising finance only available to established businesses.

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What benefits can asset finance offer a business?

Asset finance allows a business to unlock cash invested in the business infrastructure, take advantage of sales growth immediately, unlock stock and machinery value and utilise commercial property value without sacrificing ownership.

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UK Business Finance, sponsored by UKCashflow24

This guide to UK Business Finance is sponsored by UKCashflow24.

UKCashlfow24 are one of the UK's leading business finance companies.

Whatever your trading status, UKCashflow24 can offer you a host of business finance options including business loans, factoring, invoice discounting, lease finance, commercial property loans and asset finance.

Regardless of the circumstances of your business, UKCashflow24 will explore all avenues to provide you with the best business finance solution.