Start-Ups do Fail – but Alternative Finance can save the day

Alternative Finance

Unless you are truly born with the Midas touch, launching a new business is rarely going to be a walk in the park. Butcher, baker, candlestick maker – whatever your chosen venture – it takes guts and determination, planning and foresight and sometimes even a slice of good luck, to get a start-up successfully off the ground.

Oh, and let’s not forget the subject of money – without which it would be almost impossible to set any business off on the right footing. For when it comes to selecting where to go for the readies, financing a new venture is, more often than not, the key to survival.

And survival can be at a premium.

In 2014, a survey carried out by RSA, the UK commercial insurers, revealed that over half of new businesses don’t survive more than five years. The biggest reasons for failure were put down to the UK tax system, the cost of running a business and – surprise, surprise – a lack of appropriate or available funding. Not far behind that were complaints about poor cash flow management and bad debts.

Running out of Cash

These findings have been corroborated by the research analysts, CB Insights, who in 2016 provided a fascinating guide as to why young businesses hit the buffers. Ranking highest were companies attempting to launch a product for which there was no appetite or market enthusiasm. Following close behind, however, was that perennial bugbear – running out of cash. The shortage of access to alternative forms of finance for SMEs, sufficient to sustain a fledgeling business until capable of generating decent revenues, was cited by nearly one in three respondents as being the most significant cause of SME start-up failures.

This perceived lack of financing options is an interesting one. There have always been limits to how much backing the traditional High Street lenders have been prepared to provide for SMEs – that’s if they don’t rebuff the advances of the SME right from the outset. But at a time when traditional bank lending criteria is arguably tougher than it has ever been, the question is, where on earth do start-ups turn to for finance, which will first get them to the launch pad and then sustain them through the crucial early years of development?

Lack of Awareness of Alternative Finance

Sticking doggedly with the same lender could spell trouble for an SME. This may be down to reasons of loyalty, fear of being turned down by an alternative finance provider or concerns over the type of security required to support the lending.

But it can also be due to a simple lack of awareness that there are alternative finance solutions for SMEs together with alternative finance services that they can tap into. In fact, the options are ubiquitous. Yet, if business owners don’t realise this, then they could be limiting their horizons or, worse still, forced to give up on their dream altogether. All on the strength that their traditional lender won’t entertain or extend any lending facility, or has simply called time on the original loan.

SME Access to Alternative Finance

Start-ups shouldn’t be deterred! In recent years, essentially because of the limitations placed on SMEs by the big banks, a whole raft of alternative finance lenders have entered the market. This has kick-started a new era of financial support for startups that are more flexible, more relevant, more advantageous and, above all, more supportive.

Of course, actually realising that there is a large selection of alternative lenders waiting in the wings is half the battle. Indeed, for SMEs who want to survive and get ahead, in the planning stage of the venture, it would be worth exploring the benefits of alternative finance options – and capitalising on them.

Financial backing for businesses can be in the form of a peer to peer loan or in other specialist forms, such as invoice finance or asset finance. Crowdfunding is another increasingly popular option. Each is there to help raise cash or free up cash to oil the business wheels. We can help guide you in all these areas.

Presenting Your Case for Finance

Lack of financing can be caused by the business not presenting the case for a business loan sufficiently well, in order to captivate interest. Structuring your requirements before you go into bat is a pre-requisite. We can help you here, too.

Also, if the money supply is tight, due to a distressed business situation for example, then we can pinpoint specific lenders who can help SMEs achieve an immediate cash flow boost and then provide access to ongoing working capital to help with the turnaround of the venture.

Linked to this if your challenges are compounded with issues such as VAT and PAYE or any HMRC related cash flow problems, then don’t despair! As part of our alternative finance consultancy services, these are all areas where Partner Commercial is ideally placed to provide expert help and advice.

Above all, it could pay you handsomely to delve into all the available options. If your bank manager isn’t willing to listen, there are plenty of others who would be prepared to do so.

Of course, no one can guarantee 100% success, but with the wealth of alternative finance and funding options now available to assist SMEs, your chances of success have never looked so good with our help.

Check out our services here.

Back to News

No Comments

Add your reply

Your email address will not be published. Required fields are marked *