As the saying goes, necessity is the mother of invention. Whilst there is an increasing appetite for alternative finance, there's still a lot to do to inform and educate small and medium sized businesses about what's available and how to access it.

Recent OnePoll research showed that awareness of alternative funding among SMEs is still low. Nearly 45 percent of businesses said it was difficult to find alternative lenders and 30 percent of those turned down for bank funding didn't seek funding elsewhere because they didn't know where to look. Micro businesses (62%) were less likely to seek alternative funding sources than their larger SME counterparts for this reason too

Whilst peer to peer lending and crowd funding were the most commonly known amongst respondents, others such as revenue based funding and pension led funding had much less awareness amongst businesses.

Paul Mildenstein, CEO of business cash advance company Liberis, one of the latest members to join the rapidly expanding alternativebusinessfunding.co.uk portal, explains revenue based funding.

As the name suggests, revenue based finance, commonly known as business cash advance, is where the lender provides funding based on expected future trading. Unlike a loan, the investor does not tie the borrower to a fixed pay back amount. The borrowing business only pays back the advance as the business earns; it's a flexible arrangement which mirrors cash flow.

Business cash advances are very suitable for small businesses that accept payment via debit or credit card as this is how the pay back is collected. Repayment is via card takings at the point of purchase until full payback is reached. It's a painless way to pay because there isn't one large amount to pay back and all cash from transactions are kept by the business.

It's short term, unsecured finance - no collateral or guarantees are required - usually between £2,500-£300,000. The cost of a business cash advance is through a ‘factor rate', so for every pound of advance taken by a business, it pays pay back this amount plus a percentage. This single, fixed pricing includes all costs associated with the funding - there are no other charges, APR, penalties, set up fees or any hidden costs. This can be preferable to an annual percentage of return that can mount up if a loan takes a long time to repay. Unlike any other finance products available, if the business cash advance takes longer to pay off, the repayment cost remains the same.

Advances are typically up to one month's card sales, usually provided within seven days and there's no requirement for a business plan, nor is the application process complex or lengthy. It depends on the provider, but generally, eligible business must take at least £2,500 in card takings per month and have been operational for six months.

This type of funding works well for consumer facing businesses, especially those where seasonal fluctuations can affect cash flow such as those retail and hospitality. There's no other cash flow linked product currently on the market, so it's a popular form of funding especially for buying stock, refurbishments, business expansion and supporting cash flow.

The ability for businesses, especially micro and small companies, to access such flexible capital quickly and easily is creating greater demand for revenue based finance.