May 2012

Asset-based finance set to grow by 9% in 2012

Asset-based finance – that’s finance secured on business assets such as asset finance, invoice discounting and invoice factoring – is set to grow by 9% in 2012, says a new survey from the Asset Based Finance Association (ABFA). Their members predict that total funding provided by the industry to UK and Ireland firms will reach a massive £17.2bn in 2012.

There’s been a big trend towards ‘alternative’ forms of business funding over the past few years, partly driven by the troubles in the banking sector and subsequent decline in bank business lending. If this prediction is borne out over 2012 then it will firmly cement this market direction.

Business Funding On A Shoe String

Anyone who’s been paying even the slightest attention to the media in the last couple of years will know that it’s harder than ever for small, and start up, businesses to get funding from the banks.

That doesn’t mean, however, that if you’ve got a good idea and you think you can make something of it that you simply have to sit around until the economic climate clears up and banks start lending more liberally again. A lot can be done for someone who is determined and organised using nothing more than a good credit card. You do, however, have to be careful about which credit card, Santander, for example, have a good deal at the moment.

The key with credit cards is to be clever with them. If you struggle to keep on top of debt, it’s not a good way to borrow and especially not for a business purpose. But if you’re self-disciplined they can be a useful tool to get your business going.

The first thing to do is to find a credit card with a good, low, introductory rate, preferably zero. These rates traditionally last for six months to a year and are the cheapest way of borrowing money in any format (although, they’re often only suitable for relatively small amounts).

Then the process is simple – pay off what you can whilst the interest rate is zero, and as you’re reaching the end of this holiday, switch providers to another card that has zero balance transfers and purchases. In theory, you can keep doing this for as long as you need to pay the card off; however, in practise, it doesn’t always work as smoothly, which is why you need to borrow carefully and stick to relatively small amounts. If you do happen to switch onto a credit card with an interest rate you’ll want to start paying down the debt as soon as possible. At the point where you’re paying the full APR on a credit card, they stop being a good way of borrowing and suddenly get very expensive. If there’s no way you can pay off the card, or swap to another, then it’s worth looking at longer-term forms of debt, as they’re usually cheaper and the interest won’t mount up quite so quickly.

In conclusion, if your business needs only small expenses to start then credit cards can be a good way of borrowing this money. For larger sums, the best thing to do is spend a few extra days on your business plan and projected income, maybe hire an independent financial adviser, but most importantly go and see your bank manager.

Slow Broadband Affects the Majority of Rural UK Business

Almost two thirds of UK businesses have reported that their broadband is unsatisfactorily slow. The rarity of adequate broadband speeds affects rural businesses the most. This can be contrasted with the nearly half of businesses in metropolitan areas that are unhappy with UK broadband. The dire situation of broadband in the UK is all the more bizarre considering that the UK has the largest e-commerce economy in the developed world.

The UK’s copper wire infrastructure is incredibly costly to uproot and replace with fibre optic cables, and this is cited as the main reason that the UK continues to have appalling broadband standards, according to reports on internet providers. The difference between the urbanised and rural sections of a relatively small country are being referred to as the ‘digital divide’.

Self-employment and small home-run business are also present to a greater degree in rural areas. These businesses are usually located a long way away from their clients and exist to provide niche products that the larger urban areas can’t provide or manufacture, or even products and services explicitly related to rural living or produce.

Meanwhile the UK government is trying to instill confidence in the public by claiming that it plans to create fifteen ‘super broadband’ cities by 2015. This serves only to anger those in the countryside who feel neglected by broadband upgrades past, present and future. They argue that small countryside-based businesses should be helped to expand during this recession and perhaps provide employment for those that are congregating around areas of high urban unemployment.

The UK has a while to go before it catches up rural areas to urban areas, nevermind catching up with the rest of the world. The sooner the upcoming 4G broadband auction can go ahead, the more quickly the UK will be on track to securing its dominance in the e-commerce markets.

South West Businesses use Funding Circle to get over £3 Million in Financing

Almost 100 businesses in the South West have raised finance through an online peer-to-peer funding platform which brings together investors and businesses seeking funds. Funding Circle lets businesses apply for business loans of between £5,000 and £250,000, which are funded by over 15,000 individual investors around the UK.

Funding Circle has lent in excess of £3m directly to businesses in the South West, with loans averaging around £40,000. Small businesses borrow from individual people who themselves bid to lend the money. The lowest interest rate offers become part of the loan offer, so the borrower can be sure of a great deal! Meanwhile investors stay happy, as they get a better rate than on the high-street. On average, it takes 12 days for businesses to complete the process and have their loan paid out and the gross yields are currently around 8.3%.

Crowd Funding platforms have been growing in popularity over the past couple of years. The most popular feature of this type of financing is the flexibility in how businesses can use the finance.

Finding Start-Up Funding in a Crowd

StartUp Britain is a national campaign run by and for entrepreneurs to stimulate start-up growth in the UK. They have launched a free week-long schedule of events for the nation’s budding business talent in an attempt to help them secure early stage investment.

Latest figures from the Bank of England reveal that bank lending in the quarter to January 2012 was £5bn lower than the same quarter a year earlier. This has resulted in the creation of this London-based event that seeks to guide entrepreneurs through both traditional and alternative finance arrangements.

Access to finance has been identified as the biggest single barrier to growth. Furthermore, start-ups usually only need small amounts of funding! StartUp Britain aims to host an event to present all funding options and opportunities to SMEs. The event will be running from 14th – 18 May 2012. Check event details.