In this week’s instalment of our alternative finance options we are looking at Revolving Credit facilities.
They have been around for many years in different forms, most notably with the name of Overdraft Style finance.
There are two particular versions that are on offer at the moment that we like the best, one facility is for start-ups and smaller SME’s, the other for more established businesses who are turning over around £250k.
These types of lending opportunities come with many positives;
- NO non-utilisation fees – The beauty of this is once you are provided a facility, if you don’t use it there are no charges……thats right! You will only starting paying any interest of service fees once you have drawn down an amount from your facility, ands the charges are only on the amount you have drawn down!
- Stock, Work In progress, Debtor ledger – All finance options will have their criteria to calculate how much you can borrow, Business loans will be turnover, Invoice finance will be a % of debt ledger, Asset Finane will be the residual value of the asset. With new alternative lenders in the commercial world they will also look at Work in Progress (WIP) GREAT NEWS if you are in manufacturing.
- Facilities that grow with your business – Some lending facilities can be restrictive or will only suit a particular situation . Thanks to open banking platforms, there are now funders who will actually allow a facility to grow with your business, meaning you can have access to more funds as your business grows and opportunities arise.
- Higher maximum loan values – Unlike Overdrafts that typically will sit in the lower 000’s, Revolving Credit facilties can be from £5,000 to £2,000,000, there is obviously underwriting and certain criteria to ensure you meet, typically for the larger end you will need to have been trading around 15 months plus trading Business 2 Business (B2B) with £250k turnover and have trade debtors, stock and/or WIP.
- Security – For this type of facility they can be unsecured but with Personal Gurantees (PG) for new business or those not meeting the £250k turnover, or for £200k plus you will need to agree to a 1st ranking debenture.
The processes are typically painless and can be set up in 10 days, you always remain in control of the facility, funds can be drawn down in around 2 hours, and the working capital can then be used for any purpose in your business.
With rates starting from 1% per month including a service fee for draw down, does this facility give you better options.
Keep posted for our next instalment…..