Best Alternatives to Business Loans

Best Alternatives to Business Loans


What are the best alternatives to business loans in 2020? The business loan market has experienced its fair share of problems over the years. So, could a business cash advance be the answer?  Since the financial crisis, the business loans market has attracted a number of negative headlines. A series of scandals including major names such as Lloyds-HBOS and RBS has done little to restore the faith of businesses. Even so, the Government recently rejected calls to reform the sector arguing that, despite being unregulated. The alternative business loan sector has disrupted this change. Businesses may be forgiven for asking what are the best viable alternatives to business loans and how they compare.

High Street Bank Lending

Belief in the sector will not have been boosted after the high street bank Metro admitted it had made a major error in how it classifies its loan book. It revealed that hundreds of millions of pounds worth of property and buy to let loans had received the wrong risk rating. The error saw their share price fall by nearly 40%.

At the same time, it’s becoming more difficult to get a loan, with banks raising the bar on their decision making. Any business without clear evidence of strong financial performance and a good credit rating may well find it difficult to secure capital. So, if you’re worried about entering into a financial arrangement with a bank, are there any other options out there?

Short Term Business Loans

Some businesses will look towards short term business loans. These have a lower qualification criterion than conventional bank loans and allow you to receive a small sum to be repaid more quickly. However, the APR rate can be quite high with providers offering terms of 30% or more. This is only really a viable option if you’re certain you can pay it off quickly. If not, you may find yourself being forced deeper into debt. Since 2010 banks have restricted lending to small businesses. Alternative lenders have entered the market to provide some of the best alternatives to business loans the country has seen for many years.

One type of short term borrowing are emergency business loans, this the of funding plugs any gap that a business may have with its cash flow.

Business Cash Advance Lenders

If a conventional loan structure isn’t what you’re looking for, you can look to alternative lending structures. One of these is a business cash advance. This isn’t a loan – instead it’s an advance on your future payments.

This option only looks at revenue which comes through credit or debt card payments, so it’s only really useful if you’re the kind of business which takes a lot of money through card machines. Most business cash advance lenders will look for annual credit card revenues of £30,000 or more. Some providers will restrict themselves to one or the other, while others will be open to both credit and debit card revenue.

They will also want to see a decent track record of accepting card payments – six months or more is normal – to give them a decent amount of information on which to make their decision. They will examine past sales and predict what future sales might be like.

Business cash advance lenders will vary in how much of your card revenues they will be willing to advance. It could be anything between 85% and 250% of your monthly card volumes. Once accepted, they will be able to advance the money to you within one to three working days.

This is a quicker way to get the money than with a conventional loan. You will also not need as good a credit rating as with conventional loans as there are no credit checks with a business cash advance. Although this will still play a part in their decision-making process. Repayment rates can vary because they comprise a proportion of your future card sales. This can make things easier from a cash flow perspective. If revenues are higher, you’ll pay the total off more quickly. If they are lower, your payments will be less and, as such, more manageable.

Why It’s Difficult To Get A Bank Loan As An Small Business

Below are a few reasons why banks end up rejecting a number of small business bank loans applications. Chances are you’ll be rejected if:

  • Your affordability assessment shows that your income will not support your current expenses plus additional loans.
  • The bank lacks faith in, or understanding of, your business concept.
  • Your business plan and projections are not sufficient to base a solid, risk-free decision on.
  • You have a poor credit score or no credit history to reference.
  • You currently have several loans and excess debt in your name.
  • You have not been employed in a stable position for a suitable length of time.

Cheapest Business Cash Advance

All in all, this is a faster, cheapest and more accessible way you get the cash you need advanced into your business account. There are fewer forms to fill in and decision times are faster. Even so, this can be a relatively expensive way to secure a capital injection depending on who you choose. The good news is that this is an increasingly competitive sector with more providers arriving all the time. Competition places customers in a strong position and if you’re willing to spend time shopping around, you may be able to find a great deal. PDQ Funding are one of the UK’s cheapest providers of business cash advances.

This won’t be for business but offers one of the best alternatives to flexible business loans. It only really works if you receive substantial sums through your credit and debit cards, and if you are confident that revenue will be strong in the future. If you fulfil the requirements, though, this could be a perfect way to access short term capital.

What Sets PDQ Funding Apart From Traditional Business Bank Loans?

As mentioned previously, traditional banks strict lending criteria makes in near impossible for young, growing businesses to access the funding they need to continue to succeed. By applying for PDQ Fundings Business Loan alternative you can still be approved even if your credit score is less than perfect. We offer funding for all business types, including those with bad credit. Just because you have made financial faux pas’ in the past, it doesn’t mean that you have to continue to pay for it forever (or be punished by having your business ideas and dreams put on hold).

What gives specialist business loan companies like ours the competitive edge is that we work with our customers and can envision their business dreams with them. Instead of looking for reasons to reject an applicant, our dedicated account managers work hard to match them to lenders and loans they can realistically afford.

Apply for an Alternative to a Business Loan

Business cash advance lenders offer one of the best alternatives to high street business loans. If you feel your business could grow with the support of a cash advance simply complete the online enquiry.