How alternative finance can turn a nation of start-ups into scale ups

POSTED: 28th July 2015
IN: Guides

Scale-up companies could contribute a million new jobs to the UK economy by 2034, according to a report released late last year.

Alternative FinanceSee the full report.

The Scale-Up report, which focused on SMEs with the potential to expand, suggests that if such businesses were to succeed to their full potential, an additional £1 trillion would be added to the UK economy.



Supporting scale-ups

In order to give small businesses the support required, The Scale-Up Report makes 12 recommendations for action:

  1. National data on scale-ups should be made available by central government to enable support to be better targeted
  2. Public bodies should be evaluated on whether they’re helping start-ups effectively
  3. Public funding programs should be further geared towards scale-ups
  4. A government minister should be appointed to reverse the ‘scale-up gap’ that is currently faced by the UK and they must report to the Prime Minister annually
  5. To help  minimise talent shortages, the Department for Education and Local Enterprise Partnerships should connect scale-up businesses with students as potential employees
  6. Local governments, colleges and universities should also assist scale-ups to acquire and develop the talent needed
  7. Companies should be able to apply to the Home Office for a newly-created “scale-up Visa”. This will allow them to bring in skilled personnel from overseas
  8. Public learning syllabuses and initiatives should ensure effective understanding of what it takes to scale-up and help prepare future scale-up leaders
  9. The government should help raise the profile of scale-ups by establishing their leaders as role models
  10. The UK Listing Authority, HMRC and the UK Border Authority should report on their regulatory efficiency to keep reducing any drag or delaying effect of regulation
  11. The government and industry must work together to close the finance gap for fast-growth companies
  12. The government and industry must give access to infrastructure on a flexible and timely basis

Hurdles to growth

According to Sherry Coutu CBE, author of the report and non-executive director of the London Stock Exchange, there are a number of factors preventing promising scale-ups from achieving their ambitions. These include talent shortages, difficulties when navigating commercial property, and an inability to access the right combination of finance.

“Being able to develop the skills we need for the future in-house is invaluable to us. We are not only securing our future, but also developing first class engineers and manufacturing processes too. As a business we wouldn’t have been able to do this without the Invoice Finance facility we have.”

Steve Matheron, Managing Director of The Engineering Quest Ltd.

An inability to access the right combination of finance, a necessity to combat poor cash flow, is a significant barrier to growth. Indeed, for many scale-ups, poor cash flow can stifle their ability to develop into larger companies. One of the primary causes of such financial problems is the issue of late or unpaid invoices. When a company doesn’t receive the money owed from customers, it can struggle to pay its own suppliers. This can result in overtrading, particularly if the business sees a sudden increase in demand which it is unable to fulfil.

This issue of cash flow is a widespread problem. The UK late payment debt in unpaid or outstanding invoices to SMEs reached £55bn in 2014 and there was a 40 per cent increase in reports of financial stress in the same year.

Alternative finance solutions

Over recent years, some lenders have introduced a series of alternative finance solutions that can offer scale-ups access to the necessary funds, without the need for more traditional bank loans.

One high growth company that is actively using an alternative finance facility to support growth is specialist component parts manufacturer, The Engineering Quest Ltd.

The UK firm, which operates across a number of industries, including medical, nuclear, oil and space, actively ensures it keeps its growth trajectory by using the increased cash flow from an invoice finance facility to fund six new apprentices every year. And, with a projected turnover at £12m for 2015 and 20% year on year growth for the next few years, The Engineering Quest’s current success looks set to continue.

As Steve Matheron, Managing Director of The Engineering Quest Ltd., explains:

“Being able to develop the skills we need for the future in-house is invaluable to us. We are not only securing our future, but also developing first class engineers and manufacturing processes too. As a business we wouldn’t have been able to do this without the Invoice Finance facility we have.”

There are two primary invoice finance products that scale-ups could consider to unlock the cash tied up in unpaid invoices:


Factoring offers companies access to the money they are owed by customers, while also granting them the added benefit of a full credit control service. SMEs will no longer have to chase late payments themselves and will be able to focus on scaling-up instead.

Invoice discounting

Invoice discounting also gives small companies access to the money required, but unlike factoring, the scale-up will continue to collect payments from customers and manage the credit control themselves.

Steve says “Having an Invoice Finance facility is perfect for businesses with growth aspirations and plans of how to achieve them.

“I know that when I’m given the opportunity of new contracts I can immediately say yes, and I can speak to Aldermore and they will help to accommodate the finance we need to deliver on those new contracts.

“We are extremely proud of our manufacturing capabilities, and (having the financial support) from Aldermore has allowed us to seek out new markets and secure our company’s future.”

With one in five small businesses seeing cash flow as a barrier to growth, alternative finance solutions could help potential scale-ups invest in progression.

Aldermore is a British bank that can help SMEs to fund business growth through a series of alternative finance options. To discover more about the funding solutions available, get in touch with a member of our team who will be happy to help you.   

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