As we see the ‘credit crunch’ starting to take hold, with talk of finance getting harder to get for smaller business I thought a quick run through the potential sources of funding for your business.
Funding must always start at home, that means re-mortgage. As most forms of business funding for the smaller business tend to take a charge over your home anyway, why not think about a re-mortgage, the biggest benefit is the low rate you will get compared to a normal bank loan.
Next on the list has to be family and friends. Usually family are always happy to help if they can, if you have a big family then tap everyone up for a bit of cash. Friends may not be so easy, but if you have any who are business owners you may want to consider an exchange for a small share of your business, a bit of a dragons den thing going on here, but this may add another more experienced voice to your board that could help drive business forward, don’t dismiss it, think about the benefits.
Credit cards, not the best method, but nonetheless it is a method and with interest free offers could be that vital life line you need. However, without interest free this could prove very expensive with high rates of interest.
Grants, it is always worth a look to see if you qualify for a grant for either training, equipment or even staff. Try j4b Grants this resource has to be a first stop for any grant or funding search.
Overdrafts, business or personal, not cheap, but a valuable source of funding.
Bank loans, again business or personal, the advantage over an overdraft is usually a cheaper interest rate and with a repayment schedule that is to be adhered to you will eventually repay it, unlike an overdraft. Remember, overdrafts are repayable on the request of the bank, so be careful.
Factoring and invoice discounting, either of these methods can help make your cashflow problems a thing of the past, but like with any form of credit, there is a cost.
Stock finance, some business can borrow against their stock, such as car dealers. Again this is a loan, which compared to an overdraft should work out cheaper.
Leasing, if you can’t afford to buy this is an option. Leasing has benefits as well as disadvantages, but always something to consider.
Small firms loan guarantee scheme, the maximum you can borrow under the scheme is £250,000. This may be a route you take if you have no assets for a conventional bank loan to secure against.
Another method of raising finance would be to increase your prices, that’s right, if the market will stand it just increase your prices. In the same vain, look at your costs, reduce your costs, this will result in more funds being left in the business.
You can also consider other options if you are a bit bigger which entail you parting with a chunk of your business, these include Venture Capital, Business Angels or even floating on AIM .
Which ever method you choose remember to research it and don’t rush in with your eyes shut just because someone waves a fist full of cash at you Good luck.
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alastair (Who am I?)
1 year ago
I thought funding was always difficult for small firms to obtain?
Jason Holden (Who am I?)
1 year ago
Hi Alastair,
Funding varies between business types and industries, there is some truth that funding is difficult to obtain but it is far from ‘always difficult’.
We only act for ’small’ business, actually I hate the word small because in our case this means any business which has a turnover up to £5.5million which I do not consider small, but hey, as I was saying our clients obtain credit and some do find it harder than others yes.
Alot of the time having the right contacts helps.
All that said, I think the word ‘always’ may become more common with the credit crunch, so maybe we will need to revisit this in 12 months, and I may then sing a different tune.