Business finance – time to go alternative
Tony Morgan, CEO of Verus360
February and March can be gloomy. It’s cold, dark and the mountain of bills is a harsh reminder of over-spending.
Maintaining a steady cash flow is a constant juggling act for any business. This is particularly true for the recruitment sector, which often faces high and frequent running costs – particularly in meeting the demands for payroll, HMRC and VAT, while simultaneously facing extended debtor payment terms. There’s also the issue of handling the seasonal fluctuations that are common across the industry.
So what's the solution? Borrowing money on credit cards is expensive, but more shocking is the fact that one in four businesses rely on their credit cards for cash flow funding – despite the costly rates.
Other business owners will ask their bank for a loan, but if they can’t get funding they simply give up – and often stall their plans to expand, take on new contracts or recruit new staff.
Yet alternative sources of funding (AltFi) are often more cost-effective than many types of traditional finance – and, if you choose the right options, can fit the bill for both short- and long-term funding.
If you are able to calculate the true cost of your existing finance and navigate your way around the alternative finance options – from crowdfunding to venture capital – you could find the funding you need to help your business grow.
Only one in ten businesses benefit from AltFi
A 2015 YouGov poll, commissioned by Verus360, revealed that only one in ten of the SMEs surveyed were currently benefiting from alternative finance options.
Many AltFi providers operate primarily online, so unsurprisingly, the technology-literate IT, media and telecoms sectors were most likely to make use of it, but AltFi is now a realistic mainstream option for many small- to medium-sized businesses. It is also a big hit with recruitment agencies.
But before you even consider borrowing money for your business – from your bank or an alternative finance provider – look closely at the cost of the options available and check for any hidden charges.
Do you know how much your business finance really costs?
Our research has shown that 40% of UK businesses are unsure exactly how much they are paying for finance, and 30% were not convinced that the costs were transparent. The headline rate may be great – but the true cost may be much higher. Typically, total costs include:
- Penalties if you go over your agreed limit – even for a day
- A non-utilisation fee if you don’t use the loan
- An admin fee to set up the facility, an annual fee to review it, and an exit fee if you leave.
You also need to count the cost of the time it takes to set up and run traditional facilities. Many AltFi providers, like Verus360, run online, so don’t demand reams of paperwork, or long-term commitments.
We set up Verus360 to take the pain out of business borrowing. Interest rates start from 8% APR and unlike the invoice finance market, you don’t face shelling out for imposed additional charges if you need to plug a seasonal recruitment dip or rise.
Make 2016 the year to dip your toe in the alternative finance waters – and kick-start your business growth.