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The Evolving Landscape of UK SME Finance

Alternative finance has matured rapidly since 2020. Many SMEs now prioritise speed, simplicity and flexibility, especially for working capital or project‑based funding. Digital applications and data‑driven underwriting can compress decisions into days instead of weeks. The British Business Bank’s lender announcements demonstrate how the pipeline of non‑bank options has widened, while UK Finance provides industry‑level commentary on the dynamics between banks and alternative providers.

Oversight remains key. P2P platforms must hold robust wind‑down plans and fair‑value approaches, and borrowers’ rights are preserved if a platform exits. If you’re new to P2P models, the Farmers Weekly guide is a straightforward, plain‑English resource. The practical takeaway for SMEs is more choice: banks for the lowest cost when you qualify, and alternatives for speed, flexibility or bespoke structures.

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Product Line‑Up and Loan Terms: 365 Finance vs Folk2Folk

365 Finance Business Loans

What it is: a merchant cash advance. You receive a lump sum and repay a fixed total via a percentage of daily card sales. There is no fixed term; repayments flex with takings until the total is cleared (details on Rev&U and in the FAQs). Typical advances range from £10,000 to ~£500,000. No interest accrues and there are no late fees; pricing is a single fixed cost agreed at the start.

Eligibility: UK business, 6+ months trading, and roughly £10,000+ per month in card transactions. Common sectors include retail, hospitality and e‑commerce. No property security required.

Pros: Fast decisions and funding, flexible repayments that rise and fall with card takings, unsecured (no property charge), transparent single cost, well‑suited to seasonality. Cons: Only suitable if you take significant card payments; effective cost can be higher than bank loans when translated into APR; you still owe the agreed total even if you repay quickly.

Folk2Folk Loans

What it is: a secured business loan funded by investors. Loans are secured against land or property with a conservative ~60% LTV. Minimum loan size is usually £100,000. Terms run from 6 months to 5 years and are often interest‑only, with principal repaid at term end. Recent borrower rates have started in the high single digits; to understand platform scale and sentiment, see the £700m milestone and the 4thWay review coverage.

Eligibility: Broad by sector, but you must provide acceptable collateral (typically commercial, agricultural or investment property). Sectors often include agriculture, hospitality, property development and renewables (see Farmers Weekly for the nuts and bolts).

Pros: Larger tickets with interest‑only cash flow, fixed rates for certainty, secured structure can be cheaper than unsecured equivalents, established platform with strong investor appetite. Cons: You must pledge property and budget for valuation/legal costs; monthly interest is due regardless of sales; principal must be repaid or refinanced at maturity; the minimum ticket can be high for micro‑SMEs. A regional example of speed and impact appears in this Forest Economic Partnership blog.

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Cost Comparison: What Will Your Loan Really Cost?

The key difference is the pricing model and how cash flow behaves.

• 365 Finance: a fixed‑fee model. You agree a single total repay amount upfront. There is no APR or compounding interest, and no late fees. Repayments are simply a small percentage of card takings until the total is cleared (see the FAQs for how this works in practice).
• Folk2Folk: a fixed interest rate with interest‑only payments and a balloon principal at maturity. Expect an arrangement fee and an annual fee, plus third‑party legal and valuation costs; Farmers Weekly and Alternative Credit Investor outline the typical structure and fee stack.

Side‑by‑side cost snapshot

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For a visual walkthrough of revenue‑based repayments, our earlier guide includes a worked example of a fixed‑total MCA payoff: see Capify vs 365 Finance.

Worked example: 365 Finance

A café with strong card sales takes a £80,000 advance with a fixed total repay of £95,000. The café remits 10% of daily card takings until £95,000 is collected. On a busy month with £120,000 card sales, repayment is ~£12,000. On a slow month at £60,000, it’s ~£6,000. No interest accrues, no late fees; the finish line is when the total remitted reaches £95,000 (mechanics outlined in 365’s FAQs).

Worked example: Folk2Folk

A rural hotelier secures a £500,000 interest‑only loan at a fixed ~8.75% p.a. for 24 months, plus 2% arrangement and 1% annual fee. Monthly interest is about £3,645. The borrower budgets for valuation/legal costs, pays interest monthly, and plans to refinance once the refurbishment is complete, repaying the £500,000 principal at maturity (see structure notes via Alternative Credit Investor).

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Real‑World Use Cases: Which Lender Fits Your Scenario?

Scenario 1: A small business needing short‑term working capital

You run a fast‑casual restaurant with heavy card sales and a pronounced summer spike. You need £60,000 to bulk‑buy inventory and refurbish the terrace before peak season. Cash flow is seasonal, and you want repayments that flex when footfall dips in autumn. 365’s SME financing overview and the Rev&U page show how an MCA can slot into this pattern.

Why 365 Finance is the better fit

Repayment is a percentage of card takings and scales down automatically in slower months. There’s no collateral requirement and no late fee. Approval can be fast and funds can land in days, letting you start the refurb before the summer crowd arrives (see the process in the FAQs and product page).

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Scenario 2: A larger SME with asset‑backed growth plans

You own a farm estate planning to add eco‑lodges and a farm shop. You need £750,000 for infrastructure and can offer land as collateral. You want interest‑only payments during build and then refinance onto a long‑term mortgage once trading is established. For a sense of how this works locally and at speed, see the Forest Economic Partnership’s case example.

Why Folk2Folk is the better fit

Folk2Folk specialises in secured business loans against land or property with interest‑only terms, ideal for capex and build‑out projects where cash flow ramps over time. Minimum loan sizes start at £100,000 and the conservative ~60% LTV helps ensure stability. Completion is generally weeks, not months once valuation and legals are sorted (background via Farmers Weekly and platform updates via Alternative Credit Investor).

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How to Qualify & Apply: Your Step‑by‑Step Guide

365 Finance Application Process

1. Initial enquiry: submit a short form with basic business details (see 365’s SME financing page).
2. Provide data: connect card sales data or share recent statements so underwriting can assess turnover and affordability, no business plan or collateral pack required (per the FAQs).
3. Decision: approvals can be made in around 24 hours thanks to automated underwriting (see the product page).
4. Funding: once approved, funds are typically received within a couple of days; 48–72 hours from application to cash is common for straightforward cases (see Rev&U).
5. Repayment setup: repayments are automatically deducted as a percentage of daily card sales (outlined in the Rev&U overview).

365 Finance Eligibility Criteria

• UK business with 6+ months trading
• £10,000+ per month in card transactions
• Well‑suited to retail, hospitality, e‑commerce and other B2C sectors
• Soft credit check at final approval
• No property security required

(summarised from 365’s FAQs)

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Folk2Folk Application Process

1. Initial conversation: enquire online or by phone; a lending specialist discusses your business, security and use of funds (regional example via FEP blog).
2. Valuation & due diligence: provide property details for a formal valuation; the credit team reviews your project, credit profile and exit (high‑level primers in Farmers Weekly).
3. Funding & completion: investors fund the loan and legal charges are registered. Typical timeline is weeks, not months depending on valuation and legal work (see platform milestone coverage for scale and activity).

Folk2Folk Eligibility Criteria

• UK business purpose with acceptable property collateral
• First‑charge security on commercial, agricultural or investment property
• LTV generally up to ~60%
• Minimum loan ~£100,000
• Standard credit checks and documentation

(structure and norms summarised from Farmers Weekly)

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Which Lender Is Right for Your Business?

Choose 365 Finance if…

• You process meaningful card sales each month.
• You want fast funding and flexible repayments that adapt to seasonality.
• You prefer unsecured finance without a property charge.
• You value a single fixed cost with no interest accrual or late fees.

(see 365’s Rev&U overview and FAQs)

Choose Folk2Folk if…

• You have property or land to secure and need larger sums.
• You want fixed interest with interest‑only payments during a build or project.
• You can complete in weeks once valuation and legal work are done.
• You have a clear exit strategy to repay or refinance at term end.

(see platform milestone and regional case example)

Next steps: If you’d like personalised quotes or help preparing your application, speak with Funding Agent. We compare specialist lenders across the UK market and match you to the right product for your cash flow and risk profile. Visit the Funding Agent homepage or start now with our enquiry form. For a deeper dive into revenue‑based repayments, see our worked example in Capify vs 365 Finance.

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