With all the statistics out there about the growth and availability of alternative finance, it’s clear that most SMEs aren’t pursuing it as an option. Surveys indicate that they don’t understand the platforms, and with the sheer number of types, you can’t blame business owners for being confused.

But AltFi – or non-bank lending, if you prefer – has been both safety net and growth enabler for thousands of UK businesses, so it should be on your funding radar. If you’re managing expenses wisely and being smart about growth, you’re already on the ball. So what should you look for and how can you maximise your chances of getting funded?

Stay on the sunny side

As we might expect, as the legitimate opportunities in alternative financing have grown for both borrowers and lenders, shady schemes will be growing as well. Many business owners are wise to the warning signs of investment fraud and short-term loans, and loan seekers should bring the same sharp eye to alternative funding schemes. As a company in need of money, you are the “beggar” but you should also be a smart chooser, so find out a lot about the lender before applying and examine the terms with a magnifying glass before signing. Peer-to-peer networks pool funds from businesses and institutional investors; Funding Circle, a UK-based P2P platform, lets borrowers see who their lenders are, and vice versa. This kind of transparency will be important to the long-term health of AltFi.

Some investors love the idea that they are funding dreams and helping to grow the sector of small and mid-sized firms, but they are also looking for good risks. That said, these groups are willing to take a broader view of small companies, much more so than banks, looking beyond the mere balance sheet and business credit report to the personal investment, vision, and planning on the part of company directors.

Prepare for application success

Although the application process for many funding schemes is relatively straightforward, you still don’t want to be turned down, so know a few things going in.

1. You start with a better chance if you’ve been trading for at least 12 months (startup capital and incubation are another topic), even if you aren’t showing a profit. Pay to have your accounts audited – not all funders ask for audited accounts, but you will look your best if you have them. Smallbusiness.co.uk has a handy list of other terms you’re likely to encounter when researching AltFi.
2. Have at the ready your business and marketing plans, as well as anything else that will demonstrate the thought you’ve put into developing your company. Do you use expense management software or other cloud-based tools that make your business run efficiently? You never know what a potential funder might want to see, but you can bet they want to know you are serious about making a go of it. Remember that in peer-to-peer schemes, the investors are savvy businesspeople themselves.
3. Be prepared to sign a personal guarantee. Some lenders will happily provide affordable financing without collateral, but they want signed guarantees from one or more directors. They can go after your personal assets if you don’t pay up, but also they are counting on your personal commitment to the success of your business.
4. Consider applying for funding before you think you might really need it. This will help keep you from feeling desperate for cash at application time, which never creates a good set of conditions.
5. Raise red flags if you need to. No one likes to admit that their business is struggling – there is a lot of stress and emotion involved – but if you see the writing on the wall, contact your lender sooner rather than later. If necessary, they can help you sort out a new payment plan, but even if you don’t need immediate help, you’re at least signalling that you are trustworthy, which could help you later on with an account manager if things don’t turn around.

See also: Scaling-up Britain’s start-ups