Log In
What is business capital funding?
Business capital is essential for funding business growth and day-to-day operations.
If you’re experiencing a temporary cash flow shortage or looking to expand, business capital funding could be invaluable. Several types are available, with eligibility varying by:
- Sector
- Stage of business
- Business model
Read on to learn more about the types of funding and how they work.
Types of business capital funding
More than half of SMEs look for external finance to help with working capital. There is a range of options to suit your business.
Business capital funding
Business capital loans are typically used in the short or medium term. This cash flow boost helps with daily expenses, like paying employees and suppliers.
Much like traditional business loans, you apply to borrow a sum of money and repay it in instalments.
At Fleximize, we offer both secured and unsecured loans from £10,000 to £500,000.
- Secured loans allow you to borrow more at lower interest rates.
- Unsecured loans offer greater speed without requiring collateral.
Purchase order (PO) financing
Early-stage businesses can struggle to fulfil large orders. This is usually because they lack the funding for supplies and packaging.
This can cause cash flow problems as they won’t receive payment until after delivery. Business growth can suffer as a result.
PO financing works similarly to invoice financing. The key difference is that with you receive the funds ahead of delivery.
Invoice finance
With invoice finance, your business borrows against outstanding customer invoices. These unpaid invoices act as security for the lender.
This method is ideal for quick access to invoices for cash flow or investment purposes. Invoice finance helps to bridge the gap when payment is delayed for 30, 60, or 90 days.
Merchant cash advance (MCA)
MCA allows you to borrow money and repay it using card transactions plus fees.
With no conventional repayment terms, your repayments are subject to sales. The more purchases made, the quicker you repay the advance.
MCAs can help your business run smoothly by providing funding to cover:
- Unforeseen costs
- Seasonal fluctuations
- Short term expenses
- Cash flow shortages
Asset-based finance
Asset-based finance is often used by SMEs to cover short-term cash flow demands. This uses assets as security against lending, including:
- Inventory
- Equipment
- Machinery
- Property
The amount you can borrow and interest rates are based on the type and value of the collateral provided. Lenders consider physical assets, like property, less risky because:
- It is intrinsically harder to sell without their knowledge
- They favour collateral that can be quickly and easily liquidated
Loved by our customers
Pros and cons of different funding sources
Debt financing
This is the more widely used finance option by UK businesses. Businesses take out a loan and repay it with interest over an agreed time period.
Advantages
- Immediate access. Receive your funds in as little as 24 hours from approval with Fleximize.
- Tax deductions. You can count interest payments as a business expense. As a result, they are potentially tax deductible.
- Maintain control. You won’t give up ownership of your business as the lender has no equity stake.
Disadvantages
- Early repayment fees. Unlike most lenders, Fleximize don’t penalise you for repaying early. You only pay interest for the time you’ve had the loan.
- Long application process. Traditional bank applications are renowned for being time-consuming. That’s why we’ve built a quick and easy application form so you can apply in less than five minutes.
Equity financing
Equity financing is where you raise money by selling shares in your business.
Advantages
- No interest. Businesses don’t repay borrowed funds with interest. Instead, returns are based on equity participation, so returns are typically in the form of dividends or on exit from the business.
- No fixed repayment obligation. You have no debt to repay, as returns depend on business performance.
- Expertise. Investors can offer resources, advice, and connections to grow your business.
Disadvantages
- Dilution of ownership. Selling ownership shares forces you to surrender a portion of ownership, meaning you split the returns on profit or sale of the business.
- External influence. Shareholders may have voting rights. As a result, you might have to consult with investors when making a decision.
How does business capital funding work?
Business capital loans can fall into one of two categories: secured and unsecured.
The key difference is the need for collateral.
For secured funding, you’ll need to provide assets as security for the loan. Accepted assets include property, stock, and machinery, or intangible assets like intellectual property.
This means you’ll be able to borrow more and benefit from reduced interest rates.
Meanwhile, unsecured loans carry greater risk for the lender. You’ll often need to offer a personal guarantee. The total amount will probably be less than that of secured loans. However, without the need to wait for asset valuation, the application and funding process is usually quicker.
Different loans will suit different businesses. Fortunately, at Fleximize we have plenty of flexible features built into our products. Make sure to check out our Penalty-Free Promise.
Things to consider when choosing business capital funding
Finding the right business capital loan for you will depend on a few factors, including:
- The amount you wish to borrow
- Your asset base
- Your personal preferences
For example, you might want to borrow a small amount to cover VAT. We would recommend taking this out over a three-month period in line with the quarterly bills.
On the other hand, you might apply for quick business funding to grow. As such, you’d take out a larger loan with longer payment terms. This helps to prevent monthly payments from impacting your cash flow.
SMEs play a vital role in the UK economy. No two businesses are the same, and the needs of business owners are always evolving. That’s why our expert team gets to know the person behind the business. This way, we can match you with the best product, rates, and loan terms.
Not sure if a business capital loan is right for you? Please get in touch for a no-obligation conversation with our team. We pride ourselves on our knowledge and flexibility.
Even if we aren’t the perfect match, don’t worry. With the help of our partner lenders, we can explore a range of market solutions to find the right fit for your business.
If you want to know more about how we can support your business, give our friendly team a call and you'll get straight through to someone who can help, like Josh. Or, if you're ready to apply, get started by clicking the button below.
0207
100 0110
How we can help
Choose a business capital lender you can trust. Since launching in 2014, we’ve lent hundreds of millions of pounds to SME owners across the UK.
Our loans can be used for anything from new machinery to expanding premises. Each comes with a range of features, such as:
- No hidden fees or early repayment charges
- Borrow from £10,000 to £500,000 over 3 to 60 months
- Our competitive interest rates start from 0.9% per month
- We deposit funding in as little as 24 hours from approval
- Save on interest when overpaying without settling in full
- Top-ups and repayment holidays as standard
Plus, finance is only one part of owning a successful business. That’s why we created the Knowledge Hub and Member Marketplace to support your business as a whole.
What do you need for the application process at Fleximize?
It couldn’t be easier to apply for fast business funding with Fleximize. The only documents we need are:
- 12 months’ VAT returns (if VAT registered)
- Your latest set of management accounts
- Business bank statements from the last three months
Click the button below to fill out our short application form. All it takes is five minutes.
A member of our friendly team will be in touch soon, with funds in your account as little as 24 hours from approval.
Your common questions answered
Capital is the money your business needs to build, operate, and grow.
In essence, it’s the money that goes into the business to get a profit.
The five main types of business capital are:
- Working capital
- Trading capital
- Equity capital
- Debt capital
- Share capital or venture capital
Business capital is a business’ liquid assets. As the name suggests, it's what keeps a business operating.
As a metric, this helps the business owner plan for future needs. It ensures you have enough money to cover other short-term costs like salaries.
Raising business capital will depend on your purpose and how long you have been trading for.
There is no one-size-fits-all approach to funding. That’s why both our Flexiloan and Flexiloan Lite come as either unsecured or secured, depending on your business needs. When looking to raise capital, you will need to:
- Think about why you need it. The purpose of your funding plays a key role in the type and amount of capital you need. You’ll also likely be asked about this by potential lenders.
- Choose the type of funding that’s right for your business. Consider how fast you need access to funding and your current resources.
- Research lenders. Once you’ve chosen the type of capital you need, you can research providers to find the best options.
- Prepare your documents. To assess your application, we ask for business bank statements covering the last three months of trading, your latest set of management accounts, and 12 months’ VAT returns.
It’s quick and easy to apply with Fleximize. Once approved, you can expect funds to be deposited in as little as 24 hours.
Do you have a question that you can't see? Check out our FAQ page.
How SMEs Can Overcome Financial Restraint
— Read More — How SMEs Can Overcome Financial RestraintHow SMEs Can Overcome Financial Restraint
Real Business Rescue’s Keith Tully explores some of the most common financial issues you might have to deal with as a business owner and how to overcome them
Understanding Cash Flow Analysis
— Read More — Understanding Cash Flow AnalysisUnderstanding Cash Flow Analysis
Keeping track of your cash flow is essential to the overall health of your business. Here's a quick look at understanding cash flow analysis
Top Tips for Applying for a Business Loan
— Read More — Top Tips for Applying for a Business LoanTop Tips for Applying for a Business Loan
Get the lowdown before completing your application
These cookies are set by a range of social media services that we have added to the site to enable you to share our content with your friends and networks. They are capable of tracking your browser across other sites and building up a profile of your interests. This may impact the content and messages you see on other websites you visit.
If you do not allow these cookies you may not be able to use or see these sharing tools.