Sources of business finance range from retained cash to borrowing and investment. The useful starting point is the purpose, the amount needed and what the business can afford or is willing to exchange for the funding.
This guide includes alternatives to bank borrowing. It helps you compare structures before choosing a product; availability and terms depend on the provider and your circumstances.
Start with the funding requirement
Separate a short operating cash gap from a long-lived investment or an uncertain expansion. Identify the date the money is needed and the period before it is expected to generate receipts. A suitable structure for each can be different.
Build a costed plan and forecast first. An advertised maximum or a product’s popularity does not establish what is appropriate for your business.
Internal finance
Retained profits, available cash and money released from stock or customer collections can support investment without taking on a new external facility. However, profits recorded in accounts are not necessarily cash available in the bank.
Check the effect on wages, suppliers, tax commitments and reserves before committing internal funds. Selling an unused asset may release money, but consider whether it will be needed again and obtain advice on the accounting and tax consequences.
External borrowing and sales-linked funding
Loans and credit facilities
A term loan provides an agreed amount repaid over a set period, with interest and fees. An overdraft or revolving facility has its own limit, access conditions and payment rules. Compare the structure against the cash requirement.
Merchant cash advances
An advance provides upfront funds with collections linked to qualifying receipts. Check the funding fee, sales definition, collection rate and any minimum payment, reconciliation or deadline conditions.
Asset and invoice finance
A specific equipment purchase or eligible unpaid business invoices can suggest another route. Review deposits, ownership, collection responsibilities, fees and liability. These structures are not interchangeable with an unrestricted cash loan.
Equity, grants and start-up support
Equity investment exchanges an ownership interest for capital. Consider valuation, investor rights, decision-making and future ownership as well as the amount offered. It is different from scheduled loan repayments.
Grants have scheme-specific conditions, eligible spending and application timetables. Do not treat an application as guaranteed income or assume funding can be spent on any purpose.
The government-backed Start Up Loans programme is a route to explore directly where eligible. It is a personal loan for business use, subject to assessment, rather than a grant or borrowing only in a company’s name.
What does alternative finance mean?
The phrase commonly covers funding outside conventional bank borrowing. It can include lenders, credit facilities and sales- or asset-linked structures. It does not guarantee easier acceptance, lower cost or fewer obligations.
Compare the actual provider, agreement and liability. A refusal from one lender does not establish the outcome elsewhere, but an alternative provider still needs to assess its own criteria and affordability.
Choose using cost, control and cash flow
- What will reach the business after fees?
- What repayments, collections or ownership rights are required?
- Does the timetable fit the purchase and expected receipts?
- Are security or personal guarantees involved?
- What happens if sales are weaker or implementation is delayed?
The British Business Bank finance options guide provides independent background. PDQ helps businesses explore loans and merchant cash advances; it does not claim to arrange every route listed.
For business borrowing, read small business loans. For cash needed in ordinary trading, see working capital funding.
Frequently asked questions
Is alternative finance always cheaper than a bank loan?
No. Compare actual offers, the payment pattern, all charges and any security or guarantee requirements.
Can a profitable business need external funding?
Yes. Cash may be tied up before sales are collected or needed for an investment. Forecast the receipt and payment dates.
Is equity funding a loan?
No. Equity involves an ownership interest. The rights, valuation and wider obligations require their own assessment.
Does PDQ arrange every finance type in this guide?
No. The guide provides background on options to investigate. PDQ can discuss business loan and merchant cash advance enquiries.
To compare repayment obligations with changes in ownership, read our guides to merchant cash advances versus business loans and growth capital and equity funding.
Discuss your business funding requirements
Complete the online enquiry form or call 01246 233108. Explain the business, purpose and amount required so the next steps reflect your circumstances.
PDQ Funding is a broker, not a lender. We do not charge for using our brokerage service and receive lender commission following a successful introduction. There is no obligation to accept an offer.