Which Type of Funding Is Right for Me?
Compare the main funding options available to UK businesses, property investors and developers, and identify the questions to ask before choosing a lender or facility.
Choosing the right funding solution is an important decision for any business owner, property investor or developer. Several products may appear capable of meeting the same requirement, but they can differ considerably in cost, security, flexibility, repayment structure and lender criteria.
A business looking to improve cash flow might consider a business loan, invoice finance or a merchant cash advance. A property investor may need to compare bridging finance, a commercial mortgage or development finance.
The starting point should not be the headline interest rate. It should be the purpose, timescale, available security, proposed repayment method and effect on future cash flow.
Start With the Purpose of the Funding
The intended use of the money will usually narrow the suitable products before lender pricing is considered.
Improve Business Cash Flow
Consider invoice finance, an overdraft, revolving facility or merchant cash advance.
Fund Growth or an Acquisition
Consider a business loan, acquisition finance or a structured combination of facilities.
Purchase Vehicles or Equipment
Consider asset finance, hire purchase or leasing.
Purchase Property Quickly
Consider bridging finance, particularly where timing or property condition makes conventional finance difficult.
Develop or Convert Property
Consider development finance where funding is required for both the site and the works.
Retain an Income-Producing Property
Consider a commercial mortgage or another longer-term property facility, subject to affordability, valuation and lender criteria.
Business Loans
A business loan provides an agreed amount of funding that is normally repaid over a defined term. It can be used for a broad range of commercial purposes.
Typical Uses
- Business expansion
- Recruitment and marketing
- Acquisitions
- Refinancing existing borrowing
- General working capital
Potential Advantages
- Defined funding amount
- Predictable repayment profile
- Broad range of permitted uses
- Secured and unsecured options may be available
Points to Consider
- Repayments are normally fixed
- Affordability will be assessed
- Security may be required
- Fees affect the true cost
Invoice Finance
Invoice finance can release funding against eligible unpaid invoices rather than requiring the business to wait for customers to reach the end of their payment terms.
Typical Uses
- Improving working capital
- Funding payroll and suppliers
- Supporting turnover growth
- Managing extended payment terms
Potential Advantages
- Availability may grow with eligible sales
- Releases cash from the debtor book
- Can support growing B2B businesses
- Factoring can include credit control support
Points to Consider
- Generally requires eligible B2B invoices
- Service and funding charges may apply
- Customer concentration can affect availability
- Facility terms vary between providers
Asset Finance
Asset finance can help a business acquire vehicles, machinery or equipment while spreading the cost over an agreed period.
Typical Uses
- Commercial vehicles
- Plant and machinery
- Manufacturing equipment
- Agricultural machinery
- Technology and specialist equipment
Potential Advantages
- Reduces the initial cash requirement
- Spreads the cost of an asset
- Can preserve working capital
- Several ownership structures may be available
Points to Consider
- The facility is linked to the asset
- Deposits may be required
- Ownership varies by product
- Early settlement terms should be checked
Merchant Cash Advance
A merchant cash advance provides funding based partly on a business's card takings, with repayments generally linked to future card sales.
Typical Uses
- Stock purchases
- Refurbishment
- Seasonal working capital
- Short-term commercial expenditure
Potential Advantages
- Repayments linked to card revenue
- Can suit seasonal trading patterns
- Application processes may be straightforward
- No conventional fixed monthly repayment
Points to Consider
- Requires sufficient card revenue
- Total cost should be compared carefully
- Not suitable for every sector
- Repayment affects daily cash flow
Bridging Finance
Bridging finance is short-term lending commonly used where speed, flexibility or the condition of a property makes longer-term finance unsuitable at the outset.
Typical Uses
- Auction purchases
- Property refurbishment
- Chain-break transactions
- Capital raising
- Property not yet ready for a mortgage
Potential Advantages
- Designed for short-term requirements
- Can support time-sensitive purchases
- Flexible range of permitted uses
- Interest may be retained or serviced
Points to Consider
- A credible exit strategy is required
- Fees affect the total cost
- Interest may increase the redemption figure
- Valuation and legal work are usually required
Development Finance
Development finance is structured around property development, conversion and major refurbishment projects. Funding is commonly released in stages as eligible works progress.
Typical Uses
- Ground-up development
- Residential schemes
- Commercial-to-residential conversions
- Major refurbishment projects
- Mixed-use development
Potential Advantages
- Structured specifically for development
- Can fund eligible build costs
- Staged drawdowns reflect project progress
- Can support larger and more complex projects
Points to Consider
- Detailed project information is required
- Monitoring surveyors are commonly involved
- Contingency and equity requirements may apply
- An exit strategy remains essential
Which Funding Route Should You Explore First?
These questions provide a useful starting point, not a substitute for reviewing cost, structure and suitability.
Do you invoice other businesses?
Explore invoice finance, particularly where payment terms create a working-capital gap.
Are you buying vehicles or equipment?
Explore asset finance before using general working capital.
Do you need a defined sum for growth?
Explore a business loan and test repayment affordability.
Is property funding needed quickly?
Explore bridging finance where the need is short term and there is a credible exit.
Are you constructing or converting property?
Explore development finance where funding is required for the site and works.
Does most turnover come through cards?
Explore a merchant cash advance and compare its total cost with a loan.
Detailed Funding Comparison Guides
Use these guides to compare products that can meet similar requirements in different ways.
Compare the Figures Before Choosing a Facility
The Shadowfax Funding Calculator Hub includes tools for comparing loans and invoice finance quotations, estimating borrowing capacity and modelling indicative bridging and development structures.
Frequently Asked Questions
What is the cheapest type of business funding?
There is no single cheapest product for every business. Compare the total cost, fees, structure and suitability rather than only the headline rate.
What is the fastest type of business funding?
Completion times vary by lender and transaction. Property finance can require valuation, legal work and due diligence.
Can a business use more than one funding product?
Yes. Different facilities may be used for different purposes, subject to existing lender terms, security arrangements and affordability.
Is secured funding always better than unsecured funding?
Not necessarily. Security may influence access or pricing, but it also places an asset at risk if borrowing is not repaid.
Should I compare more than one funding product?
Yes. Comparing suitable alternatives can reveal trade-offs involving cost, flexibility, facility size and cash-flow impact.
Are the Shadowfax calculators lending decisions?
No. Calculator results are indicative illustrations. Actual funding remains subject to lender criteria, due diligence and final approval.
Still Not Sure Which Funding Option Fits?
Use the calculators to explore indicative costs and structures, or request a funding review to discuss your requirement.
General information only. This does not constitute an offer of finance, financial advice or a lending decision.