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No longer the alternative?


With businesses finding it increasingly difficult to access traditional routes to finance such as bank lending, alternative forms of funding have become more and more prevalent. Other sources of capital such as invoice finance, crowd funding and peer-to-peer lending have surfaced as viable means to ease cashflow pressures.

This month’s ‘Trends in Lending’ report from the Bank of England made it clear that SMEs are still faced with barriers when accessing lending from traditional banks to help manage their working capital requirements. However, the report outlined growth in alternative finance such as asset based lending and peer-to-peer, showing businesses are increasingly looking beyond the high street banks.

In doing so, they also discover that options like invoice finance offer a financing solution that is distinct from and, crucially, more flexible than traditional bank overdrafts and loans. It enables working capital to be immediately released to meet operating costs, and to allow business owners to focus on processing new orders.

By converting accounts receivables to cash on demand, companies also create a source of funding that grows as the business grows. This helps guard against cash flow challenges created by slow-paying customers, supporting businesses at each part of their lifecycles.

Alongside this, a recent article on pymnts.com references figures from the Global Commercial Banking Survey and states that the majority of businesses (51 per cent) have switched or may potentially switch banks within the next 12 months. The article suggests it’s more than just high rejection rates that are turning businesses away from banks, with recent research from Ernst & Young citing that nearly one-third of companies have experienced an error or problem with their primary bank.

Busting the myths

Busting the myths around alternative finance options will encourage more businesses to seek advice and shop around.

Cost - At first glance alternative finance may appear more expensive, but its suitability and flexibility for your business means it could be more cost-effective. For example, Tungsten Early Payment is a mechanism where suppliers select on which invoices to get paid early, and 100% of the cash, minus a small charge, is released to the business. And critically with no hidden fees, no arrangement fees, no monthly subscription fees and no minimum contract term. And since the transaction is off-balance sheet, it does not appear as a loan on accounts.

Flexibility and anonymity – Many businesses shy away from alternative finance options because they believe they will be tied into a contract or potentially lose confidentiality of financing vis a vis their customers. With Tungsten Early Payment, customers won’t know when you select to choose to use the service. As well as this, the business owner has the flexibility to only finance the invoices they choose at a time that suits them, making it a viable option for seasonable businesses as well as regular use.

Risk – Matching the appropriate financing solution to your specific requirements will reduce the financial risk and exposure for the business. E.g. expensive overdrafts and inflexible loan arrangements to manage cash flow should be replaced by careful cash management and flexible working capital solutions. When using invoice finance facilities such as Tungsten Early Payment you reduce the debt on your books and transfer the risk of non-payment from your customer over to the funder, therefore taking the pressure off your business.

Lengthy admin - As most business owners are time poor, lengthy administration or set-up processes can often be seen as a barrier to funding. Many businesses now use the latest technology to provide funding quickly and easily, such as Tungsten. Our Early Payment product can be accessed online at any time of the day via our e-invoicing platform, making it accessible and hassle-free for the business owner.

With an increasing number of businesses using alternative forms of funding, it won’t be long before alternative finance is no longer the alternative.


About the author

Carin Ly

Carin Ly is currently a senior structurer within the Trade Finance arm of Tungsten Network. Prior to this, she spent seven years with Citibank in various roles and geographies. Her most recent role was working with Supply Chain Finance clients establishing and rolling out their global SCF programmes.



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