The best alternatives to invoice financing

At Risecap, we always get to know you to understand your unique needs and preferences. So when we give you our unbiased guidance on the suitability of invoice financing for your business, we may also explore these alternatives:

• Asset finance
• A secured overdraft
• Unsecured business loan
• Merchant cash advance

Asset finance

Asset finance helps businesses buy new assets or equipment by spreading the cost over time. Instead of paying for equipment upfront, you can use hire purchase, leasing, or similar agreements to get the tools or machinery your business needs to grow.

Benefits of asset finance:

• Makes it easier to afford expensive assets, such as equipment, without large upfront payments.
• Helps businesses stay competitive with up-to-date equipment.
• Payments can often be tailored to your cash flow.

Disadvantages of asset finance: 

• You don’t own the asset until the end of the agreement (in hire purchase).
• Can be more expensive overall compared to immediately buying the asset.
• Missed payments might result in repossession of the asset.

Is asset finance right for your business?

Asset finance will be helpful to businesses that need expensive equipment but do not have the funds to pay upfront or would like to avoid upfront costs. It is best suited to startups or small businesses who need access to essential equipment or businesses who need expensive equipment such as manufacturing, transport, or tech agencies. 

Top asset finance lenders in the UK:

1. Aldermore: Provides tailored asset finance solutions for different sectors.
2. Lombard: Known for their customer-centric approach.
3. Close Brothers: Offers flexibility with great customer service.

Secured overdraft

A secured overdraft is when a business borrows money and the loan is backed by collateral, such as property, inventory or other assets. This gives the lender more security while allowing the business to access more money with better terms than with an unsecured overdraft. This is a good choice for businesses with short-term cash flow issues.

Benefits of secured overdraft:

• Instant access to extra money.
• Lower interest rates compared to unsecured loans.
• Flexible repayment options.

Disadvantages of secured overdraft:

• You need collateral, which not all businesses have.
• Risk of losing your assets if you default.
• Might have extra fees like setup or annual charges.

Is a secured overdraft right for your business?

A secured overdraft is great for businesses that need short-term cash but want to avoid loans. It’s ideal if you have assets to use as collateral. It’s especially useful for seasonal businesses handling cash flow during quiet times or industries like retail, hospitality, and construction dealing with fluctuating revenue or project delays. 

Top secured overdraft providers in the UK:

1. Lloyds: Offers simple pricing options based on your turnover. 
2. Santander UK: Provides secured business overdrafts, often allowing businesses to secure funds against assets like property, inventory, or invoices.
3. HSBC UK: Offers secured business overdrafts designed to support short-term financing needs, with collateral options available to secure higher limits.

Unsecured business loan

Unsecured business loans let you borrow money without putting up any collateral. Instead, the lender bases the loan approval and terms on the businesses creditworthiness, financial health, and ability to repay the loan. This is great for businesses that need quick cash without risking their assets.

Benefits of an unsecured business loan:

• No need for collateral, so there’s less risk.
• Quick access to cash.
• Competitive interest rates.

Benefits of an unsecured business loan: 

• You might need a strong credit history.
• Higher interest rates than secured loans.
• Limited amounts for businesses with weaker credit.

Is an unsecured business loan right for your business?

An unsecured business loan is a good option for businesses that need funding quickly without offering collateral. It’s best suited to businesses with strong credit and steady income, but limited assets. This type of loan suits startups covering expenses, small businesses needing a cash boost for growth, or any business needing short-term cash flow support.

Top unsecured business loan providers in the UK:

1. Novuna: Provides unsecured business loans with flexible terms and competitive rates 
2. Lloyds: Offers unsecured business loans with fixed interest rates, allowing businesses to borrow without needing collateral.
3. Investec: Provides unsecured loans with fast decision-making and competitive terms.

Merchant cash advances (MCA)

With MCAs, businesses get a lump sum upfront as an advance on future card sales. Repayment is taken as a percentage of daily sales. This method matches repayment to your revenue, which is helpful during slower times.

Benefits of merchant cash advances:

• Fast access to funds.
• Repayments adjust to your revenue.
• Less paperwork needed.

Disadvantages of merchant cash advances:

• Higher costs than traditional loans.
• Daily repayments can hurt cash flow.
• Terms can be complicated and need careful review.

Is a merchant cash advance right for your business?

A merchant cash advance is good for businesses with steady card sales that need quick access to cash. This is ideal for retail stores, restaurants, or hospitality businesses who have fluctuating income.

Top merchant cash advance providers in the UK:

1. Lloyds: Provides merchant cash advances, allowing businesses to borrow funds and repay through an agreed percentage of future card sales. 
2. Fleximize: Offers merchant cash advances designed for businesses with fluctuating revenue, repaid as a percentage of daily card sales

Conclusion

While invoice financing can help in many situations, there are alternatives. Risecap can help you explore and customise other business finance products like asset finance, secured overdrafts, unsecured loans, and merchant cash advances give you more choices and control over your business’s finances. 

Our goal is to help you access the best funding quickly, with complete transparency and control. Whether you’re considering invoice finance or exploring other funding options, connect with one of our expert team members today.