It isn’t uncommon for businesses to feel they may struggle to secure finance from traditional lending sources like banks. When traditional finance is withdrawn it can cause all sorts of problems for a company. However, it may be possible to secure funding from an alternative finance source, which the right accounting and financial service can help you locate. Growth companies require a particular type of accounting support.
There are alternative sources of finance out there and, as is typically the case, the most suitable for your enterprise will depend on your circumstances. All lenders will need documentation to demonstrate your ability to repay the loan, so forecasts, reports and a business plan will most likely still be required.
Friends and family
Depending on the amount you need, you may be able to secure a loan from friends and family. This is a popular option for many companies, although a formal agreement should be drawn up by your legal representative.
Invoice finance
If you have outstanding invoices tying up your finance and affecting cash flow, you could sell the debts to an invoice finance provider, although you will forfeit a small percentage. You will typically receive around 90 per cent of the value of your invoices but will have the money immediately. This is not the most cost-effective finance method but can fund a short term cash shortage.
Crowdfunding
Crowdfunding is a relatively new concept, and is basically a group of individuals who want to invest. Each person in the group contributes to the total investment amount. Unlike other forms of investment, investors don’t automatically receive a share of the company, although they may receive other benefits. Investors also receive tax relief on the amount they invest in your company. This option takes time to arrange, as you will have to prepare a ‘pitch’ to encourage investors but, with a little guidance, is relatively easy to do.
Government grants and finance schemes
The government provides grants for companies, from start-ups to established businesses. Government funding is also available for some companies, although eligibility will vary depending on the scheme. The British Business Bank can provide details of the Enterprise Capital Funds, Business Angel Co Fund and the Enterprise Finance Guarantee Scheme.
SME debt funds
This funding is suitable for established SMEs. It is a group of experienced investors who are willing to lend money to a company which is struggling to secure a bank loan. The group will expect to receive a decent return on their investment and a business plan to show this.
Obtaining finance at the lowest possible cost can be a complex task. If you would like to discuss your options for funding, we have experience in this area, so contact us and we can arrange an informal meeting.