How can alternative finance help SMEs manage funding stress?

Alternative finance
April is National Stress Awareness Month, and it goes without saying that many business owners feel the effects of stress in their day-to-day work. From pressures on time to managing staff, there are multiple factors that can put a strain on small businesses and their directors.

At Close Brothers Invoice Finance, we regularly hear that funding is a key source of small and medium business owners’ tension. In fact, according to a survey last year, more than half of business owners said that
financial worries caused them stress.

Often, owners feel that there is a funding gap: that they do not have enough money to expand, that all their capital is tied up in essential assets, or worst of all, that they do not have the cash flow to meet the demands of the business. But what can owners do to reduce financial stresses?

Consider alternatives to traditional loans

When you’re running an ambitious business, and your bank rejects your finance application, it can be a worrisome time. Although loans and overdrafts can be inflexible and have strict terms, many business owners do not know where to look for support, or who to trust, outside of traditional funding methods.

Being aware of alternative forms of lending, and taking time to ensure you choose the right one for your company, can therefore improve the wellbeing of both a business and its owners. From peer-to-peer lending, to invoice discounting and asset based lending, alternative funding may be a better option for your business.

Secure sustainable funding

Finding a sustainable form of funding is vital in today’s economy. While SMEs continue to trade and expand despite political uncertainties such as Brexit, challenging market conditions may cause business owners to have reservations about taking out large loans.

Invoice finance and asset based lending can provide a welcome alternative for cautious borrowers. Although business owners remain responsible for the borrowed amount, loans are secured against unpaid  nvoices or other company assets. This allows businesses to be confident that the lending is low risk and within their means, taking some of the stress out of daily business life.

Build a support network

If you’re trying to reduce stress or anxiety in your general life, it is often key to ensure you have a strong support network. This principle can be applied to financial worries too.

At Close Brothers Invoice Finance, every company we work with is assigned a dedicated contact from day one, and our client managers pride themselves on providing valuable, personalised assistance to every customer they work with. Whether you prefer to catch-up in person or over the phone, there’s someone available to discuss your account and offer advice.

Manage late payments

For many SMEs, late payments continue to be a pressing concern, not least because they are less likely to have the manpower to chase those who aren’t paying. However, invoice factoring can help to ease the strain on small businesses by not only releasing funds from unpaid invoices, but also providing appropriate support to collect payments. This option can allow your business to benefit from the expertise of an external credit control team, who save you the time of collecting invoices and chasing late payments.

Take reasonable precautions

Even the most stable businesses can face problems should customers become unable to pay the invoices they owe. While stress is unavoidable in these situations, planning ahead can help to minimise the effects of these unexpected situations.

Bad debt protection is a product that can be added to your invoice discounting or factoring facility to provide you the peace-of-mind that you are covered even if your customers get into financial difficulty. This includes credit checks and advice on new customers, and up to 100% protection against bad debts so you can be sure customer insolvency won’t affect your cash flow.

Put it in perspective

Overall, it’s important to put things into perspective. While some stress can be a great motivator, it can also have a negative impact on your wellbeing. Regardless of your financial stress, try to find positive ways
to cope with pressure, and remember to take care of yourself, as well as your business.

If you feel that your stress is getting out of hand or disrupting your day-to-day life, it’s important to get support. Find out more on the Mind website.