Ask any business owner and you will likely hear stories about struggling to obtain sufficient financing to grow their business. We are starting to see a shift in the way business owners access finance. Many now actively seek out other sources.
The UK’s Forum of Private Business conducted a survey and found that 26% of respondents were looking for alternative financial products. 21% of those seeking these alternatives were not available from the main High Street lenders. A Federation of Small Businesses conducted another survey and found that only 35% of respondents had used traditional overdraft facilities in 2011.
If banks are reluctant to lend money to businesses with low risk, how can the rest of the UK’s business community finance growth? These are some of the more popular alternatives to finance that you should investigate.
Better Management of Working Capital
Although this may seem like an odd source of financing, many businesses have untapped cash reserves that can be used to finance their growth. Deloitte’s 2011 report revealed that the UK’s biggest businesses had PS60 billion in unproductive working capital. Your cash can be tied up by inefficiencies in the management of working capital (debtors stock creditors and creditors). Cash can be released and unlocked. This allows for self-financed growth plans.
Cash can also be released to finance and support growth by ensuring stock levels are maintained at an optimal level through better inventory management. Look at the inventory management process to identify where cash is being held back.
Management of working capital does not only involve better control over stock and debtors, but also maximising terms offered by creditors. Do you want to keep a good relationship with your suppliers? Are you willing to pay well in advance? By taking advantage of the terms offered by suppliers, you can positively impact your cash situation. Are you able to leverage your position by requesting a wide range of terms, from 30 days to 45 day?
It is possible to release enough funds for self-finance growth by being more efficient with how you manage your working capital.
Personal Resources
Traditional funding avenues are becoming more difficult to access, so business owners are turning to their personal resources for growth. These sources can be used to fund growth, whether it’s cash savings, personal credit cards, or additional mortgages for residential properties. According to a survey conducted by the Federation of Small Businesses, 33% of respondents have used their savings for growth. Personal resources are often cheaper than using bank accounts and can be more easily accessed.