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Ways to finance your business

Posted by Michael under Business Growth

In a cash-strapped period, innovative ways of financing business growth can make the difference between success and failure – have you explored all your options?

Ways to do it yourself

1. Put in more equity – taking on a second mortgage is the traditional route, although that may not be as easy as it used to be, given the doldrums of the mortgage lending market too. Perhaps there’s an insurance policy to cash in, or an heirloom that you could sell to raise capital? G2I is an organisation that helps businesses see themselves through the eyes of potential investors and offers insight into how to raise money in tough times.

2. Phone a friend, or ask a family member – many small businesses start with money invested by family or friends who believe in the brilliant idea of an entrepreneur – perhaps you should be pitching to your nearest and dearest?

3. Pay less – if the issue is cashflow, HMRC can help. They have a Business Payment Support Service that can schedule payments to help businesses cope with the humps and slumps of cashflow.

4. Consider leasing – if it’s capital rather than cashflow that’s the problem, leasing plant/machinery/vehicles/IT equipment etc can be a way of getting over one of the big hurdles.

5. Bond issues – if your customers are loyal and dedicated and your product is distinctive, a bond issue allows them to invest directly in your success by showing their loyalty to what you do.

Investment from outside

6. Venture capital – is often seen as the ‘scary option’ but id needn’t be. There is a definite bias towards technical based companies in the current venture markets, but it’s still an option for more traditional companies, and for start-ups it can be a true launch pad.

7. Building societies – there are over fifty building societies in the UK that haven’t become part of multinational financial institutions: many of them are more willing to lend money on commercial premises than the banks.

8. Public flotation – definitely a choice for the brave and rugged, you need to have a market valuation of around £2 million and to be prepared to invest time and money in getting your flotation story just right for the currently somewhat flat flotation process.

9. Find yourself an angel – the British Business Angels Association claim that anything from a few thousand to a million can be found to develop a business via an angel who will expect to see a tenfold return on their investment in four to six years.

10. Seek funding online – Zopa is an online marketplace where lenders can vet the schemes in which they want to invest – PRIME is a Zopa-dedicated scheme for over fifties wanting to set up or expand a business.

11. Asset-based funding – another one that isn’t for the faint-hearted, this is a buy now, pay later based approach. Traditionally funding was offered against plant and equipment, but you can also borrow these days against stock inventory and even brand … if you’re brave enough.

Specialist funding

12. Government grants for training (upskilling rather than continuing professional development) or R&D are obtainable, but may require quite an investment of time in preparing the application so they aren’t an easy option for firms that are both cash- and time-strapped. There are also EU grants for small firms (employing under ten) or those made redundant who want to start a business of their own.

Game-changing approaches

13. Invoice discounting – this is the new name for what has always been known as factory – this means ‘selling’ your invoices to a third party who then processes the invoices while you draw loans against the money owed to your business. In other words, it’s a debt collection and ledger management service and while you end up working closely with the factor, it can free you to get on with what you’re good at while they get on with what they are good at – getting the money you are owed!

14. Cut your staff bill – ask your employees to take a pay cut to ease you over your current problems. In return, offer a share option, a sabbatical or some other way of supporting their dreams as they support yours.

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