Asset finance is a popular funding solution for businesses looking to grow, enabling them to invest in the equipment they need without parting with large amounts of working capital at one time. While asset finance offers plenty of benefits, it is not the right route for every business.

In some cases, a business’ application for asset finance is declined, but an application for another type of funding solution is approved. For others it might be that the repayment terms of an asset finance arrangement aren’t quite right. If this is the case for you, or you are simply curious about your options, here are 6 alternatives to consider.

1. Cashflow Loans

In some cases, using a cashflow loan to fund an investment can be an effective alternative to asset finance. Rather than financing the asset, you take out a loan to purchase it outright, and then pay the loan back in instalments over a fixed period.

The attraction for many businesses is that the cash you borrow can be used to fund investment in assets, but the loan can also be put towards general running costs or kept aside for unforeseen bills etc.

Cashflow loans are typically unsecured, meaning they don't require collateral, and are based on the borrower's creditworthiness and ability to repay the loan. The loan amount and repayment terms are typically based on the business's projected cash flow, and the loan is designed to be repaid quickly, usually between a year or two.

2. Revolving Credit Facilities

A revolving credit facility can be a flexible cashflow solution for businesses with short-term funding challenges. It acts like a credit card or overdraft giving a business access to an agreed amount of credit that can be drawn upon as and when needed, without needing to reapply.

The business pays interest on the amount used (not the total value of the credit line) until it has been paid back in line with the terms of the facility agreement. The business can withdraw cash, use it, repay it (either via daily, weekly, or monthly repayments), and repeat, without needing to reapply.

Revolving credit facilities are usually offered over shorter periods than a typical commercial loan or asset finance facility (e.g.,3 months to 2 years) but there may be an option to extend the agreement depending on the lender’s terms. It’s important to note, however, that as they are intended for short-term borrowing, revolving credit facility interest rates tend to be higher than other types of business finance.

3. Tax and PI Insurance Loans

If you didn’t need to pay your tax bills in one lump sum, would you have enough capital to invest in the assets or equipment that you want to? If that is the case, it might be worth considering a tax loan.

By taking out a loan to cover the cost of your tax bill by HMRC’s deadline you keep cash in the business for other investments and spread your tax repayments over a fixed period. This arrangement can also help with budgeting and cashflow.

You can take out a loan to cover the cost of VAT, corporation tax, or self-assessment, as well as the cost of your Professional Indemnity (PI) insurance. Paying PI insurance can be one of the largest costs for businesses, but many do not realise that they can spread the cost over time.

4. Invoice Finance Facilities

If your business doesn’t have enough working capital to fund investments and asset finance is not a viable option, invoice finance may help you to free up cash that is locked up in unpaid invoices.

Rather than waiting days or weeks for your invoices to be paid by customers, if you have access to an invoice finance facility a lender will advance you up to 90-95% of the invoice’s value immediately. You then pay the lender what you have borrowed, as well as any agreed fees, when the customer settles the invoice.

Invoice finance provides quicker access to cash which can be used to invest in assets, or cover operational costs.

5. Merchant Cash Advance

Merchant cash advances (MCAs) can be a useful funding tool for small to medium-sized businesses that process a high volume of credit and debit card transactions (in-person or online), such as retailers, hospitality businesses, and trades like electricians or plumbers.

With a merchant cash advance, a lender would provide you with a lump sum of money, and you would pay it back by giving them a percentage of your card transactions as well as any fees. The funds that you receive upfront can be used to purchase assets or to fund other areas in your business.

A typical deduction is often around 10% of each card sale deducted on a daily, weekly, or monthly basis via a percentage of the company’s sales, plus interest, until the amount is repaid in full. Repayment time scales for MCAs typically range from three to 18 months.

6. Growth Guarantee Scheme

While the Growth Guarantee Scheme is not a funding solution in itself, it can help small and medium-sized businesses to access the finance they need to grow. It launched on July 1st, 2024, replacing the Recovery Loan Scheme (RLS) which ended on 30th June 2024.

The Growth Guarantee Scheme provides a 70% Government-backed guarantee on finance taken out by SMEs giving lenders more security, strengthening the application. The scheme will cover lenders offering loans, asset finance and invoice finance in amounts up to £2m helping UK businesses to access the financing they need. This might include working capital or investment to stabilise their operations or invest in growth opportunities.

Making the right choice for your business

It is important to note that each of these funding solutions will carry different interest rates and fees, and often the more flexible products like MCAs and revolving credit facilities will carry higher interest rates.

Bluestone is an ethical and FCA-regulated finance intermediary. We are committed to ensuring that our clients make informed financial decisions based on their requirements, and always recommend that our clients seek independent financial advice from an authorised source before committing to any financial agreements.

If you would like to explore any of these funding solutions in more detail, get in touch using the enquiry form below. One of our friendly and experienced team will be in touch as soon as possible.