Alternative business funding in the UK: your complete guide
By Helm, Funding Specialists
- Alternative funding has grown significantly in the UK, with billions provided annually outside traditional banking
- Options include merchant cash advances, invoice finance, crowdfunding, peer-to-peer lending, and asset finance
- Each option suits different business types, stages, and needs
- Many alternatives are faster, more flexible, and more accessible than traditional bank loans
The days when your only option for business funding was walking into a high street bank are long gone. The UK alternative finance market has grown rapidly, providing billions of pounds to businesses that either choose not to use, or cannot access, traditional bank lending.
Whether you have been turned down by a bank, need funding faster than traditional channels can provide, or simply prefer a more flexible arrangement, there is likely an alternative that suits your business.
Merchant cash advances
A merchant cash advance provides a lump sum upfront, repaid through a percentage of your daily card sales. It is one of the fastest and most flexible alternatives to a bank loan.
Best for: businesses with strong card turnover that need capital quickly. Restaurants, retail shops, salons, and hospitality businesses are particularly well suited.
Typical amounts range from £10,000 to £500,000, with funding available in 24 to 48 hours. There are no fixed monthly payments, no collateral required, and no personal guarantee in most cases.
Invoice finance
Invoice finance allows you to borrow against the value of your outstanding invoices. Instead of waiting 30, 60, or 90 days for customers to pay, you receive a percentage of the invoice value immediately.
Best for: B2B businesses with long payment terms and reliable customers. It is particularly common in manufacturing, recruitment, and professional services.
You typically receive 80% to 90% of the invoice value upfront, with the remainder (minus fees) paid when your customer settles the invoice.
Peer-to-peer lending
Peer-to-peer (P2P) platforms connect businesses that need funding with individual investors willing to lend. The platform handles the application, credit assessment, and repayment collection.
Best for: established businesses with a decent credit history that want competitive rates. P2P loans are structured like traditional loans with fixed monthly repayments.
Rates can be competitive, but the application process is more involved than some alternatives, and funding is not always immediate.
Crowdfunding
Crowdfunding involves raising money from a large number of people, typically through an online platform. There are two main types: reward-based (backers receive a product or perk) and equity-based (backers receive shares in your business).
Best for: consumer-facing businesses with a compelling story or product. Crowdfunding also doubles as marketing, building an audience of supporters before your product even launches.
However, campaigns require significant preparation and marketing effort. Not every campaign reaches its target, and failed campaigns can be disheartening.
Asset finance
Asset finance allows you to spread the cost of equipment, vehicles, or machinery over time. The asset itself serves as security, which often means lower rates than unsecured options.
Best for: businesses that need specific equipment but do not want to pay the full cost upfront. Common in construction, transport, manufacturing, and hospitality.
Revenue-based finance
Revenue-based finance is similar to a merchant cash advance but is not limited to card sales. Repayments are linked to your total business revenue, making it suitable for businesses with a mix of payment methods.
Best for: businesses with strong overall revenue but not necessarily high card turnover. It offers the same flexibility as an MCA but with a broader repayment base.
How to choose the right option
The right funding option depends on your specific circumstances. Consider these factors when making your decision.
- How quickly do you need the money?
- What is the funding for: working capital, equipment, growth?
- Do you process significant card payments?
- Are you comfortable with fixed monthly repayments?
- Do you have assets or invoices to use as security?
- What is your credit history like?
Comparison at a glance
This table summarises the key features of each alternative funding option.
| Option | Speed | Repayment | Best for |
|---|---|---|---|
| Merchant cash advance | 24-48 hours | % of card sales | Card-heavy businesses |
| Invoice finance | 24-48 hours | When invoice is paid | B2B with long payment terms |
| Peer-to-peer | 1-4 weeks | Fixed monthly | Established, creditworthy businesses |
| Crowdfunding | 4-12 weeks | Rewards or equity | Consumer products, startups |
| Asset finance | 1-2 weeks | Fixed monthly | Equipment purchases |
| Revenue-based finance | 2-5 days | % of revenue | Mixed payment businesses |
Frequently asked questions
What is the fastest alternative to a bank loan?
Merchant cash advances and invoice finance are typically the fastest options, with funding available within 24 to 48 hours in many cases.
Can I use multiple funding options at the same time?
Yes. Many businesses use a combination of funding options. For example, you might use asset finance for equipment and a merchant cash advance for working capital.
Are alternative funding options more expensive than bank loans?
Some are, some are not. The total cost depends on the product, the amount, and your business profile. The key advantage of alternatives is often speed and accessibility rather than cost alone.
Do alternative lenders check credit scores?
It varies. Some alternatives, like merchant cash advances, focus primarily on revenue and card turnover rather than credit scores. Others, like P2P lending, conduct full credit assessments.