Helping Small Businesses Flourish with Alternative Financing

Whether it’s to help fund new stock, much-needed repairs or extra seasonal demand for staff, securing financing can be an important job for an SME-owner. Yet as many as one in three SME’s have reported difficulties getting loans from high street lenders, potentially putting expansion plans in danger, according to Worldpay research [i].

The great news is that there are now alternatives for entrepreneurs looking for vital cash to support their businesses. All over the country, SME owners like Devon pub landlord Paul Darch are helping to fund their ambition with Worldpay Business Finance. 

Time for change

The Jack Russell Inn is a charming local pub situated in the village of Swimbridge, in the heart of rural Devon. Although it’s been trading since 1852, owner Paul Darch purchased the business in 2006, and was itching to update an interior not significantly altered since the 1970s. Along with the major refurb, Paul wanted to upgrade the restaurant with a smoker, imported from America. The idea was that as well as provide a talking point for customers and an enticing smell throughout, it could streamline things in the kitchen, enabling serving staff to run more tables in the evenings and increase turnover.

The challenge Paul encountered was financing. Over recent years, it appears to have grown more difficult for small businesses to secure loans from traditional financial institutions. Successful loan finance approaches to banks dropped from 90% in 2007 to 65% in 2011 in the aftermath of the financial crisis [ii]. In 2014, government figures revealed that half of applications from first time SME-borrowers were rejected [iii]. Brexit uncertainty has made SME owners even more pessimistic of going down the traditional route: over half (52%) of those interviewed by Worldpay last year said they didn’t think banks would lend at the same levels in 2018 [iv].

A new way to grow

Fortunately, alternative financing options exist, offering a range of new technology-driven approaches to lending which don’t rely on traditional banks. The idea is that they’re quicker and easier to secure than traditional loans, with less form-filling, credit checks and admin needed. It’s a market in which £4.6bn was raised in 2016 alone [v].

To secure extra funds at a crucial time, Paul chose Wordpay Business Finance. Launched in 2015 in partnership with alternative financing firm Liberis, it has already provided funding of over £75 million to UK SMEs. Funds can be made available in as little as 48 hours and, as repayments are calculated as a fixed percentage of card transaction, SME owners only pay it back once their customers pay them - mirroring their cashflow and ensuring no unexpected costs. There is no APR, harsh varying terms or penalty fees and everything is agreed upfront with one fixed cost [vi].

It’s already paying off for the Jack Russell Inn, allowing Paul and his team to cater in the summer without needing to increase staff. He was so impressed that he’s taken out three further advances to renovate the barn area into a pop-up cinema and live music venue for the local community [vii].

“In the future, we may consider putting in a conservatory out front; this would be a big undertaking, but we would use Worldpay’s funding to make this happen,” he says. “It’s such a flexible way of financing things.”

Focused on the future

Despite the potentially choppy economic waters ahead, UK businesses are confident about the future. More than half of those Worldpay polled last year claimed they were planning to grow in 2018 [viii]. It seems that the growth in popularity of alternative financing is helping to drive this confidence. Some 40% of business owners under 35 we spoke to claimed they are more likely to put their faith in alternative financing offerings as a way to reduce their reliance on traditional lenders [ix].

With SMEs an important contributor to the UK economy [x], this is great news for the future.