SME finance: how to get funding without using loans for your business

POSTED: 22nd September 2015
IN: Guides

With so many companies looking to secure funding, the government, private investors and a selection of modern lenders have introduced alternative finance solutions

Although the government has described small to medium sized businesses as ‘the lifeblood of our economy’, SMEs are still finding it difficult to access traditional bank finance.

With so many companies looking to secure vital funding, the government, private investors and a selection of modern lenders have introduced a series of alternative finance solutions that can help small businesses to grow.

Here are just a selection of options for small businesses to consider:

Invoice finance

For SMEs struggling under the pressure of late payments, an invoice finance solution can give them access to the cash tied up in unpaid invoices, allowing them to trade effectively and invest in business growth. Depending on the provider, businesses may be able to gain access to more funds than a typical overdraft.

This type of finance works in one of two ways: invoice factoring and invoice discounting. With factoring, the credit control of the invoice debt becomes the responsibility of the lender, who will conduct the credit control on behalf of the business. The difference with invoice discounting is the outstanding invoice debt and collection remains the responsibility of the business. 

Another way to unlock money from assets within the business is with an ‘asset-based lending’ (ABL) agreement. Businesses that need to access capital for cash flow purposes can release funding against the value of multiple assets already within the business, such as stock, plant & machinery and property.

Asset finance

Companies looking to fund the purchase of new equipment could benefit from an asset finance solution such as lease finance or hire purchase. Both options allow the business to access the equipment they need and spread the cost of the asset over a predetermined period of time.

The difference between the two lies in what happens once the payment plan is complete; those businesses on a hire purchase contract take ownership of the asset outright while those leasing the asset will need to either renew their contract or purchase it by paying off any outstanding value in a lump sum.

Government grants

There are various government grants and funding schemes available to help start-ups and SMEs to progress. Some schemes offer funding to small companies with high growth potential while others can offer tax relief to investors that are willing to support higher risk trading companies.

Business accelerators

Business accelerators could be worth the consideration of entrepreneurs looking for more support than just funding. Companies can use business accelerators to access the cash injection they require, often alongside mentoring and guidance from investors with knowledge of the industry. However, in return, company owners will be expected to offer investors an equity stake in their business.

Peer2Peer (P2P) lending

The P2P solution is a relatively new concept to the world of business finance.  It essentially puts savers in touch with borrowers; anyone looking to invest their money can handpick entrepreneurs or businesses in need of funding.

Some P2P lending options allow businesses to contact private lenders directly to discuss the loan and terms, however, in this recently regulated space, there are still some risks for both parties to consider.


Crowdfunding essentially allows people to pledge funds in a crowdfunding arrangement, which is usually motivated by an idea that resonates with them in some way or the promise of free products further down the line. For the borrower, this process can help to both raise awareness of their new product or concept while gathering feedback from potential customers.

However, budding entrepreneurs making use of crowdfunding may need to devote a considerable amount of time to marketing their business idea in order to attract the attention of potential funders. Even then, there are no guarantees that the idea will generate enough interest to raise the full funding target.  

For more information about the alternative business finance options available to SMEs, get in touch with Aldermore. By offering a series of invoice and asset finance solutions, Aldermore can help small businesses to achieve their goals and reach their full potential without the need for traditional bank loans.

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  • Asset Finance
  • Business
  • Invoice Finance
  • SME
  • Cashflow
  • Guide