Capsule 006: SMB Lending & Working Capital Financing

Ask most founders what financing options exist for their business and you’ll get two answers: their bank overdraft, and whatever their invoicing platform offered them last week. That’s not because the menu is short — the UK market runs from high-street incumbents through specialist challenger banks to non-bank lenders built around genuinely different mechanics. It’s because nobody ever lays the whole menu out plainly, and because every option quotes its cost in a different language. An APR, a rate-plus-fee, a discount-fee-plus-service-fee: comparing them directly, on the headline number alone, is exactly how operators end up choosing the more expensive option while believing they’ve found the cheaper one.

This Capsule fixes both problems. You get the full financing menu — overdraft, term loan, invoice finance, asset finance — laid out without any one positioned as the default, plus a true-cost calculator that converts each type’s own cost language into one comparable effective annual figure. A decision matrix then matches financing type to what you’re actually financing, because the cheapest option on paper still has to fit your actual need.

By the end you have a financing cost hierarchy built before you need one, not scrambled together under pressure. The worked example throughout: three real offers for a working capital gap, where the facility that felt most natural — borrowing against money already owed — turns out to be the most expensive of the three once priced properly. That’s the entire discipline this Capsule teaches: never chase the cheapest headline rate.