Select from the below to get started on helping you to determine the best finance for your business:
Finance Options for a Start-up, not yet Trading
Seed Finance is the initial capital used to start a business – sometimes called seed funding or seed capital. Seed finance often comes from the company founders’ personal assets or personal borrowings, or from friends and family.
The amount of money is usually relatively small, because the business is still very much in its nascent stages – certainly pre-profit, usually pre-revenue and pre-proof of concept.
If you are interested in seed finance, there are increasing numbers of organisations that offer this, and many resources available for more information.
Business angels, either on their own or as part of an angel network or syndicate, provide business funding in return for equity, but can also provide valuable experience and guidance to a growing business.
An angel investor (also known as a private investor, seed investor or angel funder) is a high net worth individual who provides financial backing for small startups or entrepreneurs. The funds that angel investors provide may be a one-time investment to help the business get off the ground or an ongoing injection to support and carry the company through its difficult early stages.
If you have a great business idea, or have been trading for less than a year and are looking for finance and support to help develop your business, a startup loan from Start Up Loans could help.
Funded uniquely by the British Business Bank, Start Up Loans is a national scheme to provide advice, loans and mentoring to startup businesses. Applicants can apply for a startup loan here https://www.startuploans.co.uk/
Finance options for an Early Stage or Established Business
A Business Loan is a common form of finance for small businesses and one of the first options for businesses looking to raise finance. The lender provides money that the borrower pays back, with interest, over an agreed period. There are Secured Loans and Unsecured Loan, check out our article here to see the differences – The Difference between Unsecured and Secured Loans .
This is a line of credit attached to a business bank account or debit card which allows businesses to draw on money (up to an approved limit) beyond what they actually have in the account.
Asset finance relates to the way you pay for the physical assets in your business, whether that’s to help you get new assets (asset finance), or money loaned against your existing assets (asset refinance).
Assets can be anything that’s vital to the operation of your business, such as large-scale plant or machinery, any type of vehicle or fleet of vehicles, catering equipment and even commercial premises.
Because of the added security it provides, there’s plenty of flexibility available with asset finance products, such as seasonal payment structures and balloon payments.
Invoice Finance providers use unpaid invoices as security for funding and approved businesses can access a percentage of an invoice’s value quickly, sometimes within 24 hours.
The amount of funding given is based on the risk criteria of the Invoice Finance provider, but it allows businesses to access finance for cashflow or investment purposes using an often-untapped asset on its balance sheet.
Export financing is a cash flow solution for exporters. It allows businesses that sell products or services to another country to get access to cash before their clients pay for the products ordered
Trade finance is the collective term for a wide range of finance tools available, including cash, credit, investments and other assets, that can be used to facilitate trade. In its simplest form, an exporter will require an importer to prepay for goods to be shipped. In return, the importer will ask the exporter for proof that the goods have been shipped.
This process will usually begin with a letter of credit being sent by the importer’s bank to the exporter’s bank promising payment once certain shipping documents have been seen. The exporter’s bank will then loan the money to the exporter based on the contract that has been agreed.
Bonds – retail bonds or corporate bonds – are a way for companies to borrow money from investors in return for regular interest payments.
Bonds have a predetermined ‘maturity’ date when the bond is redeemed and investors are repaid their original investment. A lender is tied in until the bond matures. Bonds can have an advantage over loans in that the business issuing the bond can have more control over the specific terms of the finance.
Traditionally, corporate bonds and retail bonds would be traded on the stock market and really would only be available to larger companies with a trading history. However, this is changing. Recently online platforms have entered the market, offering a one-stop-shop for raising finance through bonds.
This the online offering of private company securities to a group of people for investment and therefore it is a part of the capital markets. Because equity crowdfunding involves investment into a commercial enterprise, it is often subject to securities and financial regulation.
Venture capital is the private finance provided to companies from their initial launch through to when they secure an exit or can be funded by more traditional financial means. Venture capital is generally not structured to be a long-term investment. All levels of venture capital, from angels to private equity houses, look to hold their investments for between five and seven years, after which they look to exit through an IPO, trade sale or from selling shares to another investment firm upward or lateral in the chain. For instance, angels may sell to VC funds in later funding rounds and VC funds may sell to private equity houses.
Private equity is a term for investing in private companies – ones that aren’t traded on the stock market and don’t have shares. Most private companies are reasonably new and therefore unpredictable. They can be risky investments because the company could easily fail.
Finance Options for a Stable business looking to ‘Go Public’
When a business reaches a certain point, it may require significant investment in order to make a step change. This may involve applying for a public listing of its shares. Whilst some very large companies choose to remain private, many are listed on the stock market.
The process of listing is time-consuming and involves a range of advisers, but it is an opportunity for a company to critically examine itself. The decision to launch an IPO (initial public offering) or flotation must be based on a realistic assessment of the business, its management, where it is in the stage of its development and its prospects.