Building your business doesn’t have to be an uphill battle: alternative finance for the cycling industry

IN: Guides

It doesn’t take an expert to notice that cycling is growing in popularity. Whether you repair broken bikes, design sportswear or own a cycling shop, if you work in the industry, you will probably have seen first-hand that business is booming.

undefinedThe good thing is you don’t need your brand’s name on a jersey to reap the benefits from Britain’s increased interest in cycling. Small businesses within the industry can benefit too.

Obviously we have the likes of Wiggins, Hoy and Pendleton to thank for their success in the London 2012 Olympics, along with our first ever Tour de France win. But there are also much less glamorous factors such as the increasing cost of public transport, the mind numbing hours spent sat in traffic and our ever-growing fear of getting fat.

Cyclists come from all walks of life and if you’ve been in the industry for a while, the clichés are easy to spot a mile off. You have the humble middle-aged man in Lycra (MAMIL), the smartly dressed commuter who wishes they’d bought mud guards and the thrifty vintage lover who dug their bike out of a skip. Perhaps the versatility of cycling is also to thank for the increase in cyclists pedalling down our streets. You don’t need years of practice or to be extremely fit to hop on a bike. All you need is a nice set of wheels and a desire to shed some pounds in weight while gaining some pounds in your wallet.

The government have promised to invest £148m into improving Britain’s road to make them more cyclist-friendly and so the future is looking bright for bike related businesses. According to Halfords, the retail market for bikes, cycle clothing, parts and accessories in Britain is worth £1.4bn and is growing at approximately five per cent a year. Let’s not forget the success of the sports nutrition market too, which is worth over £320m in the UK alone.

It’s not just UK money that is being thrown into the cycling industry, many British cycling companies have reported selling their goods overseas too. But in order to allow your business to thrive and capitalise on industry growth, you may need to get cash flowing easily through your company.

While cycling in the Tour de France might often be an uphill battle, sorting your finances doesn’t have to be. If you need a little help with this, read on to find out about the different types of finance available.

Asset finance

Leasing or renting assets rather than buying them can help save you money.

Asset finance also allows you to purchase high quality equipment that you might not have been able to afford to buy. For example, if your business manufactured cycling helmets but required an expensive piece of machinery to help to speed up the process, then asset finance could be employed to allow you the business to pay for the equipment over a period of time, rather than all at once. Although this generally means that you will pay more for the new asset, in many cases, this can really pay off because the machinery will help you to increase efficiency and therefore make more money as a result.

Interest rates are usually fixed and it’s less risky than a secured bank loan because you aren’t at risk of losing your home or other belongings. If you can’t afford to pay, you’ll simply lose the asset.

You’ll also be covered if the equipment breaks down as the leasing company will carry the responsibility for replacements providing you make regular payments.

However, you won’t be able to claim capital allowances on a lease asset if the leased period is less than 5 -7 years.

If you sign up for a long term contract you might not be able to cancel early and you may have to pay a deposit or make payments in advance.

Invoice finance

Invoice finance can help to get cash flowing into your growing business. If you have cash tied up in unpaid invoices or need more than a typical overdraft, this could be for you.

It involves a third party buying your unpaid invoices for a fee. Invoice financiers may be part of a bank or financial institution or they may be independent.

There are two types of invoice financing in the UK:


Factoring can also be called ‘debt factoring’ and it usually involves an invoice financier managing your sales ledger and collecting money owed by your customers. Your customers will know that you’re using invoice finance as a result. When an invoice is raised, the bank will buy the debt owed to you by your customer. They will make a percentage of the cost and will collect the full amount from the customer directly. Once the money has been received by the bank, they make the remaining balance (after they’ve taken a percentage) available to you. You will then have to pay a discount charge and fees. So it’s important to ask your financier how much this will be. 

For example, consider a retailer was to purchase a large order of bike locks costing £10,000. To maximise on the cash coming in, rather than wait for the 30 day (or often longer) terms, you can sell the invoice to the bank or invoice financier for £8,500 and receive the payment up front.

The lender will collect the full amount from your customer and pay you the remaining £1,500 when payment for the bike locks has been received. Your business will then pay interest and fees to the financier.

The good thing about factoring is that it gives you more time to focus on your business, as you won’t have to look after your sales ledger yourself. Potential customers will also be credit checked, meaning that you can refrain from working with people who are unlikely to pay on time. Your financier can also help you to negotiate better with your suppliers.

However, some customers may prefer to deal with you directly, rather than another company, and so this might not be ideal in some cases.

Invoice discounting

Invoice discounting is another type of invoice finance which can help to improve the cash flow within your business. The financier won’t manage your sale ledger or buy your invoices from you. Instead you’ll borrow money from them against your unpaid invoices. This is a percentage of the total value which you’ll agree with the financier beforehand. A fee will need to be pain on top of this.

The benefit of this is that customers won’t know that you are using invoice financing as you will deal with the customers as normal, but as they pay their invoices, the money will go to the financier.

Packages can often be designed to suit your business

If you’re keen to keep things confidential, this could be the option for you as your customers won’t know that you are borrowing against their invoices. Invoice discounting can also be beneficial if you want to continue to stay close to your customers, as you’ll be managing their accounts yourself.

However, you’ll lose profit and your ability to access other funding may be compromised as you won’t have ‘book debts’ available.

For more information on financing your business, get in touch with our expert advisors at Aldermore. We want to make it easier for you to invest in your company so that you can get on with building your brand and doing what you love, cycling. With Aldermore making it easier for you to bank and helping to get cash flowing, now all we need is more cycle lanes to make it easy for your potential customers to get to work. 

The content published on this website is intended to provide information only. The reader should seek advice from experts on the subject matter and independently verify the accuracy and relevance of any information provided here before relying upon it or using it for any reason. You can view our terms and conditions here.

  • Business
  • SME
  • Article
  • Commercial Mortgages