Alternatives To Business Overdrafts

Traditionally, business overdrafts from high street banks were a popular way to help fund shortfalls in cashflow, providing many businesses with the ability to simply overdraw against their account for a brief period of time.

However, over the years traditional banks have become more reluctant to lend and dramatically reduced both the number and level of overdraft facilities available. As a result, there is growing demand from businesses for alternative finance options, with increased flexibility too.

Here we outline two of the most popular alternatives to the traditional business bank overdraft.

Merchant Cash Advance

If your business regularly uses a card machine for customer payments, why not consider a merchant cash advance? This versatile option works in a similar way to a loan but is based specifically on your forecasted debit / credit card sales.

The lender calculates the average turnover for your business and both parties agree an advance amount. The business then repays this amount plus a fee, which is a percentage of all card receipts to the lender, until the final amount is paid off.

A merchant cash advance is a very popular funding option for businesses such as shops, restaurants and hotels who process a high volume of card payments. Also, a flexible solution for small businesses who need cash quickly and may not qualify for a traditional loan due to adverse credit histories, such as CCJs or defaults.

Invoice Finance

Did you know your business can borrow against the sales ledger by using an invoice finance product? This innovative approach enables your business to receive upfront payment for invoices without having to wait until the end of the payment term, which could be a lengthy process.

Essentially, the lender provides an advance based on the value of the outstanding invoice and when the invoice is paid, your business receives the remaining amount less an agreed small fee. Currently, there are three key types of invoice finance available, known as invoice discounting, invoice factoring and invoice trading. Some lenders also offer the option to raise finance against single invoices or specific customers, which provides additional flexibility.

This finance facility also grows in line with your business sales, enabling firms to expand with less risk by using unpaid invoices to provide a swift cash injection to reinvest in the business.

Talk to the experts

At Ideal4Finance we work with a broad spectrum of reputable lenders to provide competitive finance options for our wide variety of customers across the UK. We regularly secure merchant cash advances, invoice finance deals and alternative overdraft facilities from a number of private lenders, to suit your business.

Contact us on 01772 963846 or via email at to find out the best funding option to boost your cashflow.