Unlock the full potential of your SME by evaluating your business needs and exploring commercial lending options that will prioritise growth and sustainability.
The Changing Landscape of SME Commercial Lending
The landscape of commercial lending for SMEs has dramatically shifted in recent years. With the rise of online banking, traditional relationships between bank managers and SME owners have diminished.
As the reliance on physical bank branches decreases, SMEs must navigate a broader array of digital financial services, which include online banking platforms, mobile payment systems, and digital wallets. These services offer convenience and efficiency, allowing business owners to manage their finances from anywhere at any time.
However, with this convenience comes the responsibility of becoming educated on new products that will benefit their business. SMEs need to understand the intricacies of these digital tools and stay aware of new or alternative finance products that can better serve their business.
Building Stronger Relationships with Non-Traditional Financial Institutions
In light of the evolving banking environment, SMEs should consider establishing relationships with non-traditional financial institutions. These institutions, such as, fintech companies, or finance brokers often provide more flexible and innovative financial solutions.
Non-traditional lenders can offer quicker approval processes, more personalised services, and specialised products tailored to the unique needs of SMEs. Consider a commercial finance broker, who possess decades of experience in steering businesses towards the most suitable products and deals for their needs, rather than what they might initially believe they want.
Building strong relationships with these institutions can help SMEs access the capital they need to grow and thrive.
Exploring Diverse Financing Options
With a multitude of financing options available, SMEs should take the time to explore and understand the various products on offer. Beyond traditional business loans, options such as invoice finance and merchant cash advances can provide vital cash flow solutions.
Invoice finance is a financial solution that enables businesses to unlock the cash tied up in their unpaid invoices, thereby providing them with immediate access to much-needed funds. By leveraging their outstanding invoices, businesses can quickly obtain a percentage of the invoice value from a lender, which can be used to cover operational expenses, invest in growth opportunities, or manage unexpected costs. This approach not only enhances liquidity but also offers flexibility.
Merchant cash advances, on the other hand, provide businesses with a substantial lump sum of cash upfront, which can be particularly beneficial for addressing immediate financial needs or seizing growth opportunities. In return for this advance, businesses agree to repay the lender by allocating a predetermined percentage of their future credit card sales. This repayment method is advantageous for businesses with fluctuating revenue, as the repayment amount adjusts according to sales volume, offering flexibility during slower periods. Unlike traditional loans, merchant cash advances do not require fixed monthly payments or collateral, making them an attractive option for businesses that may not qualify for conventional financing.
Both these options can be more adaptable and accessible than conventional loans.
Evaluating and Refinancing Existing Agreements
Many SMEs may be locked into finance agreements made years ago, without realising that better deals or more suitable products are now available. Businesses should regularly perform "business health-checks" to assess their current agreements. Just as personal finances can change, business finances are also subject to fluctuations, and agreements made in the past or at the inception of the business may no longer suit the present needs.
These business health checks should involve a thorough review of current finance arrangements, ensuring that all aspects of the existing agreements are carefully examined. This includes evaluating the interest rates, repayment terms, and any associated fees or penalties that may apply. Additionally, businesses should actively shop around to compare a wide range of different financial products available in the market. This comparison should not only focus on the interest rates but also consider the terms and conditions, such as the flexibility of repayment schedules, the availability of additional features or benefits, and the overall suitability of the products for the business's specific needs.
If conducting business health checks is overwhelming for your company, finance brokers can frequently offer this service at no cost, providing you with a valuable opportunity to benefit from their extensive expertise and industry knowledge. By leveraging their insights, you can gain a clearer understanding of your business's financial standing and identify areas for improvement.
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