Achieving the Right Funding for Your Business

Investment

You may be looking for funding to start a business, improve your cash flow or to take your business to the next level. Whatever the reason, the majority of businesses in these circumstances, turn to their bank for guidance and support, but is this really the best solution?

First and foremost, it is important you are clear about what you need funding for and what it will help you to achieve. You then need to keep an open mind and do your research – there is more out there than just loans and overdrafts.

Research
Your own resources, family and friends and banks are a great place to start, but there are a host of other sources of finance out there that many people are not even aware of.
The Better Business Finance website is a great place to start when looking for finance options. However, to help you get on your way, we have listed below some of the most popular options.

  • Asset based financing –
    • If you are struggling with your cash flow or need access to money right now, asset based financing can help you release money tied up in assets or your future revenue.
    • Who Benefits? Sales based businesses and those businesses in the retail and hospitality sector that experience peaks and troughs in their revenue.
    • Providers: Not only can you access this type of finance from many of the major banks, but other providers include Market Invoice, a company that purchases your unpaid invoices and releases the money within 24 hours.
  • Angel Investment
    • This is where an individual provides financial support for a business, usually for a business start-up and in exchange for equity or shares. Often you will get more favourable terms from an investor, than a lender, as they are focussed on helping the business succeed and grow.
    • Who Benefits? Normally start-ups and entrepreneurs that have growth potential.
    • Providers: UK Business Angels Association represents 18,000 investors in the UK, helping to connect those looking to receive and give funding.
  • Private Equity Funds
    • This is commonly where a number of investors ‘form a club’ to invest in a private company. The principle investors are commonly pension funds, insurance companies and high net worth individuals. This is normally in exchange for a stake of the company that the fund will sell several years later for a substantial profit.
    • Who Benefits? This is a major finance option and so is more suitable for larger companies.
    • Providers: London Stock Exchange Group, London Business Angels and MMC Ventures. Many providers focus on different regions of the UK so make sure you research your local area.
  • Regional Growth Fund
    • The government’s Regional Growth Fund supports eligible projects and programmes in the private sector that are able to create employment and contribute to economic growth.
    • Who Benefits? Any business owner that is looking for funding of less than £1 million.
    • Providers: Programmes are run by national or local organisations. You can see a full list here.

Once you have chosen what type of funding you need. It is important that you research the different providers and pick one whose terms and conditions best suit your business.
Another important point to remember is that you are not guaranteed to receive the funding you desire. However, if you take care of the below two points, you will stand a better fighting chance:

Business Plan
To guarantee funding from any source you need a solid business plan with realistic forecasts. This is your chance to sell your business and make investors feel confident in its potential.

Strong Credit Score
Many lenders like to invest in low risk businesses. Therefore, show your business is not at risk by paying your bills and invoices on time and maintaining a strong credit score.
After reading this article, if you find you are still unsure as to what funding option is best suited to you, consider approaching a broker. A financial broker will listen to your requirements and will introduce you to lenders that can satisfy your needs.

If you have any questions regarding funding, we can help put you in touch with a broker and also ensure your business plan is up to scratch. For further information, please contact lauren@raffingers.co.uk.