Skip to content
Go back

Article Tags:

Please choose from the following:

How external finance can support three critical phases of a business’ journey

How external finance can support three critical phases of a business’ journey

All businesses face common challenges around expansion and consolidation at each stage of their lifecycle, none more so than SMEs who are now responsible for 60% of UK private sector jobs and 47% of turnover. Moving up a gear requires investment, whether that be in physical assets, staff, research and development, or sales and marketing. Without very deep pockets, it's nigh on impossible to grow a business on a stable footing without external finance.

Wesleyan Bank highlights the key reasons SMEs should consider alternative finance options to support three critical phases during their business journey.

Expansion and growth

According to research*, the future for UK SMEs looks bright thanks to a younger entrepreneurial generation who are achieving a higher rate of growth and are more open to alternative finance solutions than their older counterparts.

65% of small business owners under 29 say their business grew by more than 20% in the last year compared to 44% of 30-44 year-olds and just 25% of those aged between 45 and 69. Intriguingly, 44% of owners under 30 stated they had used external finance to fund a business venture compared with only a quarter of over 45s.

While age is just a number, established SMEs are ideally positioned to take advantage of the opportunities external funding presents in order to grow their business and invest in the future. There's a range of finance options to suit all businesses, which go beyond traditional sources such as bank loans. Some of the most popular options include:

Tax funding- Tax liabilities place a substantial strain on even the most thriving organisation, leaving many SME owners feeling anxious ahead of the 31 July payment deadline. By speaking to a specialist finance provider, businesses can choose to spread the cost of their tax liability over six or 12 months to ensure they have working capital when they really need it without having to put any expansion plans on hold.

VAT funding- As with tax liabilities, VAT returns represent a significant outlay for any business. By selecting a flexible finance solution, SMEs can spread the cost of their VAT bill over 3-12 months to gain better control and predictability over their cash flow.

Asset finance- Investing in new specialist equipment and refurbishing office space can be vital in ensuring the future success of an organisation. But this can be cost prohibitive if SMEs elect to pay for all new investments upfront.

Tailored asset finance solutions enable businesses to spread the cost of new investments over time to support their growth aspirations, with the option to purchase equipment outright at the end. In addition to allowing SMEs to retain cash in their business, asset finance solutions make it possible to achieve a quicker return on investment.

SMEs should also seek to take advantage of the Annual Investment Allowance (AIA). The AIA helps businesses to write off the cost of certain assets against profits in the year of purchase up to £200,000, bringing much quicker tax relief against capital expenditure compared to spreading the relief over several years.

Sustaining momentum

So you've managed to succeed in establishing your business within your chosen industry with a healthy balance of new and existing customers. But how do you sustain your momentum and expand into new markets in the face of increasing competition? According to Wesleyan Bank's *research, the most significant areas of concern affecting SME positivity are competitive pressure and the challenge of maintaining a strong digital presence. In many sectors, businesses are competing with both a flood of providers of a similar size and also against larger players with more money and more resources. If these challenges are currently impacting your business, now might be a good time to consider alternative finance options.

With the rate of innovation increasing rapidly, IT finance solutions allow businesses to bridge the gap to keep pace with technological advances and stay one step ahead of their competitors by continuing to flourish. Specialist providers offer tailored finance plans to help spread the cost of IT solutions by incorporating hardware, software, installation, training and support fees in one affordable package. Businesses also gain the added flexibility of being able to upgrade part way through without a significant increase in monthly cost.

Start-ups and new businesses

Without a clear separation between business and personal finance, new start-ups and sole trader businesses often take a consumer approach to borrowing rather than a commercial one which could derail their future plans before they have even had chance to get started.
Wesleyan Bank's 'SME Attitudes to Finance' report suggests a lack of knowledge of alternative finance options are the reasons why most external funds are coming from a very limited range of sources.

The most popular options cited by the survey's 543 SMEs were credit cards and overdrafts at 38% with bank loans trailing behind at 31%. Furthermore, 55% admitted they had dipped into their life savings to fund their business. In doing so, SME owners are exposing themselves to greater risk and are unlikely to find the funding best suited to their particular needs - if they are obtaining any funding at all.

New businesses should be aware that just because they can't or are unwilling to borrow from a high street bank, this doesn't mean they are not entitled to funding. It's often better to remain open minded and look for a finance provider who is prepared to spend time to understand their challenges, in preference to those offering a one-size-fits-all approach.


It's only natural for SMEs to be cautious about making a financial investment, but there's an equal risk in failing to seek support for growth. By speaking to a specialist provider to understand the plethora of external finance options available, businesses can make the correct funding decision so that they no longer have to be reliant on traditional sources alone or take unnecessary risks. *Wesleyan Bank's 'SME Attitudes to Finance' report surveyed over 500 SME owners across a range of ages.

'WESLEYAN’ is a trading name of the Wesleyan Group of companies.

Wesleyan Assurance Society and Wesleyan Bank Ltd are authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Wesleyan Financial Services Ltd, Wesleyan Unit Trust Managers Ltd, Practice Plan Ltd and DPAS Ltd are authorised and regulated by the Financial Conduct Authority.  Advice about investments, insurance and mortgages is provided by Wesleyan Financial Services Ltd.

Click for more information about the Wesleyan group of companies.

© 2021 Wesleyan Assurance Society