Venture Vault

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The Funding Options For Your Business

It is likely that your bank will probably not lend you any more money for your company, unless you are prepared to offer your house as security, which goes against the whole purpose of having a limited company, in so much as the liability of the company is limited. With the banking crisis which is well documented and has been covered in every way shape and form that is possible, this has left small business owners with not many options in terms of their ability to get funding from the banks. Having previously worked within the banking world, I know that there is little or no appetite (certainly in the UK) to lend money to small businesses, unless they don’t really need it. So we have to look at alternative funding methods, so that is what we will discuss here.

So first we will consider what the options are. For some people they may be completely comfortable that they are going to be able to meet the requirements for their business and therefore will be happy to offer some of the residencies equity in return for a loan or overdraft facility. Some people will not be comfortable with this, and will need to consider other options.

First consider the fact that you may not need funding. What if you were able to delay payment to some of your suppliers, or alternatively receive payment earlier from some of your customers, this may make the difference from a cash flow perspective, which may in turn mean that you no longer require additional funds. However, for some things this is not going to be practical, and therefore we will have to consider the funding options.

Funding options are:

–          Try another bank. Just because your primary bank has decided not to lend money to your company, that doesn’t mean that another bank will come back with the same response. All lenders will have both different criteria, and also certain allocations of capital for certain sectors. So for example if Lloyds has too much exposure to the healthcare sector, their underwriting criteria may become increasingly tough, whilst HSBC may be looking to expand their exposure to this sector. Therefore in my experience it is worth trying alternatives. It is extremely important that you have a well researched and documented business plan, something on the back of a cigarette packet will not suffice, do the background work and make the right impression up front as this will massively improve your chances.

–          Consider private equity or angel investors. This type of investment will require you to give away a stake of your business, however if you are able to secure the right level of funding for the right equity stake, you may increase the critical mass of your business and massively improve your prospects. This is not for everyone, however if you have a development cost or some of significant upfront cost requirement this can work. Before you give a large chunk of your business away consider how this will make you feel in future years when you are not making lots of money, but then having to give some of it away.

–          Try friends and family, you may not have considered everyone who may be interested in taking a small equity position in your company.

–          Try asset finance. If you are looking to purchase a specific asset it may be easier to fund it directly on the asset, as the lender will then have security against this and therefore may not have to take a charge over your residential property. Plus this will normally mean that the finance will be fixed for an agreed term, but can also be fixed at an agreed rate of interest meaning that your outgoings will be fixed.

–          There may also be a number of grants which are available to you, including local government grants and also other funding methods which you may not have considered. Speak to your local business link representative and they may be able to advise of some funding methods which you may not have considered.

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