Tough economic climate
UK’s inflation is soaring to its highest rate in 30 years, the market predicts that borrowing rates will go up to 4%, and according to Times Finance, 91% of SMEs have been forced to increase their prices in order to keep up with rising operational costs. It’s a tough market to operate in, and SMEs will be the first to bear the brunt.
1 in 5 businesses will struggle to remain competitive and will have to scale back on investing in their company; meaning SMEs will have to re-assess immediate expansion plans, reduce staff, and cut down on any non-essential business expenses.
For brokers, the challenge today is to bridge businesses with flexible funding solutions that reduce the impact of inflation.
Limitations of the broker network
It is not surprising that given these conditions, brokers in the UK financial services sector are struggling to match their clients with the best possible funding offers through their usual sources.
Traditional lenders, with their conservative risk models and rigid repayment schedules, do not account for alternative risk predictors and end up rejecting funding applications for many promising businesses.
What brokers need are ways to expand their reach and confidently entertain new types of offers for their clients - not face more restrictions from lenders looking to reduce risks before a possible recession.
Alternative financing: A bright new opportunity
To counter this problem, embedded finance providers use alternative data to generate rich insights into the trajectory of the businesses they fund; such as seasonal revenue, social media presence, and customer acquisition trends.
In contrast, traditional lenders use only two simplistic inputs - revenue and operating history - and end up disqualifying many small businesses from funding opportunities. Alternative financing instead uses a variety of data points that help expand the pool of qualified clients. This makes it possible for brokers to provide funding to as many businesses as possible - and to expand their sources of commission-based revenue.
The power of a diversified financing offer
In this economic climate, speed must play a huge part in access to finance. With the ongoing supply-chain crisis, more businesses face unexpected disruptions in shipment and cashflows, meaning SMEs now need funding in a matter of days, instead of weeks or months. That is where the power of diversified financing offers kicks in -tech-driven providers can remove the hurdle of long, manual applications for both brokers and merchants. They can process applications within 24 hours, allowing SMEs to respond swiftly to all their expenses such as bills, orders, marketing, and expansion plans.
For brokers, this means that the quicker they deliver a deal, the more frequent their commission is.
“YouLend has been an excellent partner to provide cash advance funding to our merchants. From the first funding, the team has been committed to working with us to continually enhance the merchant experience.” - Product Owner at Funding Options
Use Cases at YouLend
Fast-food Franchise - UK - £1.3 million in funding
Take the case of a local fast-food chain restaurant that was introduced by our broker partner, Rainstone Financial Services Limited. It faced a common business problem; the managers wanted to refurbish and expand operations through new branches. YouLend saw immense potential in the restaurant’s ability to pay back due to its high volume of website orders and positive Trustpilot reviews. Hence, with a modern credit assessment model, YouLend extended a record £1.3 million with flexible 11% revenue-based repayment to the merchant.
The deal was a huge success for the 50+ restaurant chain and also proved to be a great opportunity for our introducer who earned a sizeable commission through their partnership with YouLend.
“YouLend was easy to work with and completely understood the business needs of my client. They provided flexible repayment terms for our merchant which helped him manage cash flow easier." - Broker at Eezeepay Merchant Services
Candle and Soap Shop - UK - £100,000
Similar is the story of a local artisan candle and soap shop that required £100,000 in capital for raw materials and stock building. It was a very common business problem, but the merchant had already been rejected by two other major lenders due to the required funding size and price. YouLend was able to use alternative data to understand the true pain point of the business and provide an offer within 24 hours.
Seasonal Restaurant - Netherlands - €150,000 in funding
Lastly, one of YouLend’s European broker partners from the Netherlands bridged a deal to fund a seasonal restaurant that experienced tourist-based business and wanted to expand its seating to an outdoor area. With such sporadic revenue streams, many lenders were hesitant to finance the business. However, YouLend was well-suited to accommodate the business’s needs as our revenue-based repayment plan gives restaurants the flexibility to pay back only when they earn.
With such promising success stories, alternative finance emerges to be the ideal solution for brokers who value speed, flexibility, and a simplified application process for their clients. YouLend prides itself on funding 9 out of 10 businesses and can provide offers ranging from £1,000 to £1,000,000 within days.
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