Getting access to the right type of funding, that’s right for your business, at the right time – can be the deciding factor between success and struggle.
UK SMEs typically have two routes of capital-raising for growth, acquisitions and other strategic milestones: Equity or Debt financing.
So, how do you know which is best for you? We look at the funding options of both.
When you borrow money from lenders to support your business, it is known as debt financing. Here you don't need to give company shares to your lender, instead you pay back the principal amount with interest within a specific repayment period. The interest rates can be fixed or variable depending on the loan product.
Due to the lower level of risk to the lender, secured debt is generally easier to obtain, and cheaper to service. But unsecured loans are also widely available.
What’s the upside of taking on debt financing?
The downsides are usually that the money is more expensive and no matter what happens, you are locked in to a repayment agreement.
So, if you are looking for debt financing and would like to discuss how we can help fund your growth plans, please feel free to get in touch with us at SME Capital.
With equity financing, businesses sell a part of their business to an external investor or venture capitalist in exchange for capital through the issue of shares.
Taking an equity stake in a business, an investor is asking for a stake in your future business profits rather than asking you to repay the funds with interest at regular intervals.
What are the advantages?
The disadvantages of Equity Financing usually revolve around control and a new way of working.
So which financing option is suitable for you?
Selecting the right financing option for your business depends on your circumstances, and preference. There is no one-size-fits-all approach for SMEs.
Business owners tend to choose equity finance when they perhaps lack previous business experience and don’t have the trading books to apply for a loan. Others don’t want to commit to paying fixed loan payments every month and want to keep cash flow to cope with the growth plans.
Debt financing is a route for more established businesses with reliable cash flow and an established business model, who want flexibility with both short-term and long-term funding options.
Many SMEs choose debt financing to maintain control over their business and don't want to share ownership of their company or profits. For them, the risk of losing decision-making control outweighs taking on debt investment.
Every business is different, and so is its funding requirement. So you should always carefully consider your options.
SME Capital Debt Financing
At SME Capital we do not ask for personal guarantees or collateral.
We provide specialised, long-term financial alternatives rather than a general loan that applies to all businesses in the UK.
We are here because we firmly believe that our specifically designed finance solutions for UK companies, which will aid in your growth and success, represent a better option. We are experts in SME lending, therefore every customised loan we make for you will be designed especially with the goal of becoming your long-term finance partner.
Whether you need financing for a refinance, succession planning, M&A, or growth and expansion, we give you the opportunity to thrive without asking you to give up control, equity, or personal assets.
If we don't think it is the right direction for your business, we'll tell you.
SME Capital uses a cash flow-based approach to lending, offering a multiple of business profitability, specifically EBITDA, as opposed to a loan amount being directly tied to the value of specific assets. We can provide an economic solution to consolidate smaller lenders, or refinance expensive short-term loans, while providing additional working capital for the business.
With repayment terms from 3 to 7 years and flexibility on repayment structures SME Capital is an effective, relationship-led, refinance solution for qualifying businesses in any sector that have been trading more than 3 years with £250,000+ EBITDA.
About SME Capital
SME Capital was founded to support the growing number of SMEs who face difficulty or frustration in accessing capital through traditional methods. We understand the importance of real and trusted relationships in the SME lending market and have dedicated Regional Directors based across the UK. By combining traditional lending expertise with the latest in data analytics, we are supporting established UK SMEs with their long-term objectives and business ambitions.
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