For businesses looking to grow, the right kind of finance is essential.
You’ll need to look at the different options available if you’re aiming to take on staff, buy assets or expand premises, to merge businesses, or simply to allow your business to grow and meet demand.
Knowing what the market offers is also vital if you’re a start-up or you need to improve your cash flow to ensure your business survives. Poor cash flow is the number one reason UK businesses fail – some studies put cash flow failures at more than 80% of insolvencies.
Here’s our guide to finding the right deal for you:
You’ll need to have a realistic cash flow projection and be able to prove you can cope with the interest payments. You may need to put up security such as your house or car.
The British Bankers’ Association has a finance finder tool you could use: https://www.betterbusinessfinance.co.uk/?finance-finder
The tool helps you compare loans and interest rates from different banks. If you’re turned down for a loan, it also gives you tips on how to lodge an independent appeal.
Business angels and the Business Growth Fund
Business angels are established private investors or private investment companies who will give you access to funds for a stake in your company. Think Dragon’s Den. Often, the funds come with mentoring and advice. Each deal will be different – make sure you’re comfortable with the level of stake required. Find out more here: https://www.ukbusinessangelsassociation.org.uk/
The Business Growth Fund has £2.5 billion of capital and is also an equity investor for growing businesses in the UK. It aims to work with businesses who already have a good track record, typically with an annual turnover of more than £5 million. Find out more here: https://www.businessgrowthfund.co.uk/
Invoice financing companies and leasing
There are a number of companies which help you access funds to ensure cash flow. Invoice financing allows you to access up to 90% of the value of unpaid invoices for a small fee. Most factoring companies pay you then take on the burden of chasing the debt. Once that’s paid, the arrangement ends. Compare different companies and their rates here: https://bit.ly/1spgxA3
There are also leasing and HP companies which will allow you to lease items like office equipment and cars. This is particularly valuable where items depreciate in value and when you don’t have a large up-front sum to buy them.
Charities and the Community Development Finance Association
Finance, training, and mentoring are available from The Prince’s Trust for people aged 18 to 30 who want to start a business. Find out more here: https://www.princes-trust.org.uk/help-for-young-people/support-starting-business
If you have a social enterprise or community-focused business, you could check out other charitable trusts here: https://www.acf.org.uk/
Responsible Finance is the new name for the CDFA. It supports social enterprises and meets Financial Conduct Authority requirements. Find out more here: https://responsiblefinance.org.uk/responsible-finance-providers/what-is-responsible-finance/
Government and local authority funding
It’s worth looking at what’s on offer from these bodies. For example, a number of local authorities run a redundant building grant scheme to bring disused properties back into use.
Finance Wales offers commercial growth investment to Welsh businesses from £1,000 to £2 million, investing in start-ups and established businesses using money from the Capital Growth Fund. It is also able to help businesses willing to relocate to Wales. Find out more here: https://www.financewales.co.uk/
An increasingly popular method of raising finance, crowdfunding is estimated to have raised $1.5 billion for businesses worldwide in 2011. Crowdfunding allows large numbers of people to loan small sums to businesses for interest on their funds, and equity crowdfunding allows people to invest in businesses for a small stake in the company. Businesses need to pitch their project to potential investors online, and loans or investments will only go ahead if the necessary number of funders is reached. Loan and equity investment are regulated by the FCA to protect investors. Find out more about crowdfunding from the UK Crowdfunding Association here: https://www.ukcfa.org.uk/ and from the FCA here: https://www.fca.org.uk/consumers/financial-services-products/investments/types-of-investment/crowdfunding
You could use an approved independent broker to help you find finance.
The BBA has a list of approved brokers here: https://www.betterbusinessfinance.co.uk/finance/national-association-of-commercial-finance-brokers
The National Association of Commercial Finance Brokers can put you in touch with individual brokers who can act as intermediaries between you and a range of finance providers including banks and peer-to-peer lenders. Visit its website here: https://smallbusinessfinancedirectory.co.uk/
The NACFB complies with an Office of Fair Trading code of practice and has more than 1,000 brokers as members using more than 100 lenders.
So if you’ve hit a brick wall with the bank, check out some of the other options which could help your business flourish.