How can Start Ups and SMEs raise finance?

The biggest challenge for any new or small business is funding. Every business needs funds to grow and prosper. We look at the different ways these types of businesses can raise the finances they need to succeed.

1. Business Loans

Business loans are usually unsecured facilities that can be used for varying purposes, such as working capital/stock purchases/equipment purchases. Usually, businesses will have to demonstrate a suitable trading history and directors may have to provide some kind of personal guarantee. The former may be difficult for start-ups, however there are some lenders that will lend to new businesses, although they may be limited in the amount they can borrow. Being unsecured, lenders will likely consider the financial and credit health of the company itself and the owners/directors.

2. Government grants/loans

There are a number of different grants and loans that the government have made available for businesses that have been negatively impacted by Covid-19. These include the Bounce Back Loan and CBILS (Coronavirus Business Interruption Loan Scheme).

The different loans that the government offer have been covered in previous posts, but applications for these schemes have been extended until 31st January 2021.

3. Refinancing business assets

Sometimes, a business owns assets that can be used as collateral to raise finance against. For example, a printing company may own equipment that has no outstanding finance on it and can be used for further borrowing.

4. Refinancing personal assets

This is similar to the last point, however with a focus on assets owned by the business owners rather than by the business itself. Property or personal assets, such as gold, jewellery and watches can be used as collateral for a secured loan. This is not always an option that is first considered when thinking of funding options, however it can be a better way of using items that may otherwise be kept in storage.

5. Angel Investor/Crowdfunding

If you believe that your business has huge potential and could benefit from investment, then you could be interested in finding an Angel Investor. Finding an Angel Investor may be a long process, however it could mean bringing someone in with invaluable knowledge to your business. Such an investor may look for equity in the company for their investment. Crowdfunding platforms are another great way to find investors, allowing businesses to attract many different investors for equity in the company.

6. Alternative Finance

There are alternative options available for small businesses that are geared at improving cash flow. This improved cash flow could mean more funds available for investment. These include:

- Invoice Finance

- VAT Loans

- Revolving Cash Facilities

- Overdraft Facility

- Leasing

If you would like to know more about any of the options discussed and want to see if AssetLend can help, feel free to get in touch!