Dispelling Some Of The Myths Around Alternative Funding (AF)

Useful information pertaining to Pension Led Business Funding.

As the alternative business funding market continues to grow and offer a valid alternative to traditional funding from high street banks, much scepticism and doubt about the industry remains.

In fact, some business owners avoid pursuing alternative finance options due to doubts around time, credit scores and risks attached with alternative lenders. To help give you a clearer picture of the market and the options available to you, take a look a few of the myths around alternative finance debunked.

Alternative Finance is Expensive

Some businesses avoid alternative funding like the plague, as it is often assumed to be a very expensive option as opposed to the traditional bank lending market.

Admittedly, rates can be more aggressive, particularly for alternative short term funding options and the fees not always the most competitive but if blended with the traditional route, AF can prove to be a key part of the overall business cash flow and help to shore up the gaps in vital company acquisitions.

A typical example of this might be a business who enjoy a good turnover and profit but at the same time struggle to secure borrowing at a competitive rate from a traditional lender; anecdotal evidence shows that as little as 35% of Companies in the UK sector enjoy an annual percentage rate lower than 6%.

This is where the AF market wins, by offering a more competitive offering, and usually a product more aligned to suit the sector it’s working to help.

It Takes Too Much Time

The mere thought of being dragged through a hedge backwards and back again, in order to secure funding is in itself a dreadful experience and of course without any guarantees.

The AF market has overtime honed itself on being more of an aspirin to swallow as opposed to a suppository when it comes to “application and paperwork time”, and who in the world likes filling reams of paperwork and application forms?

The timeframe of acquiring your funding might be an imperative part of your overall planning, certainly if its to fund new stock required to supply a large last-minute order.

The Bank said No, So I Have No Other Options.

This is a classic AF myth that only those businesses rejected by traditional lenders or banks are naturally pushed into alternative finance, in fact, many are not even made aware of this growth market.

No doubt securing funding with your bank is the obvious route, but what about the high percentage of businesses who are unsuccessful at acquiring funding from the banks? Statistics show that a very low percentage of these very same businesses go on to investigate their funding through AF channels.

So, what have we learned from this? Well, first of all, we are still a long way from educating the SME sector that this is fast becoming a primary second tier of available UK funding, and secondly, are we still relying too heavily on the bank sector in the first place.

AF Is Only for Business with Bad Credit

It’s just not true!

If this were the case then the AF market would frankly cease to exist rapidly, simply because no lender in its right mind would seek to engage with businesses that are in danger of constant default on repayments.

In short, the AF market would be putting out more fires than it starts. On the contrary, the AF market has a more forensic approach, as are its clients who are also seeking to be successful within their own sector too. A good AF lender is looking to work with a growing business and in turn, become the “go to” funding outlet of choice for other future projects.

Losing control may be another reason for the reluctance of AF use, but this has been born out of invoice discounting and factoring market where the belief still remains that your clients no longer recognise your business as a point of reference. Not all ID and factoring companies are the same and some cater to your brand still being recognised as part of the overall transaction.

AF is thankfully starting to be more widely recognised by all businesses. Not only more widely recognised but as a business owner a mark of being more financially prudent when choosing the right funding solution. There is no doubt that over the coming decade we will see a rise in growth of this funding sector and are already seeing it move into the mainstream.

Using an Alternative Finance Company Has More Risk Attached

Clearly, where there is a market there is competition, and it is now apparent that a plethora of new players have entered the AF market with thousands of different options to consider when acquiring funding for your business.

Great on the one hand, mind-blowing on the other, plus we are always going to be at the mercy of the rouge traders who are only out to line their own pockets and as a consequence a poisoned chalice for the vulnerable business owner.

However, let’s not tar everybody with the same brush. The quick fix to sorting out the wheat from the chaff is to employ the services of a central body who can first understand your funding requirement and the adjudicate the best fits for your circumstances.

Opus Business Pensions operates as that very platform, where lenders and brokers have been initially vetted and their services tested. For the client wishing to secure funding, this takes out the guesswork, frustration, plus multiple phone calls and research. The advantage being a one to one service level at no direct cost.

Alternative Business Funding Experts

At Opus Business Pensions, we work with a range of trusted lenders and AF providers to get businesses funding that suits their unique requirements. For more information about the alternative business funding options available to you, give us a call today on 0121 725 0099 or fill out a contact form and we’ll get back to you.