Do you need to raise money for the continuation and growth of your business?

If so, no longer is traditional bank finance simply the only option. However, many business owners do not consider other options available to them if they are unable to raise money with their bank.

The banks are open to lending money, and we have seen many examples of this over recent months, but here are some of the most common ways business owners are raising finance for their business at this time:

  • Traditional Bank Finance – banks, and other similar commercial lenders, traditionally arrange finance using Overdrafts, Business Loans and Commercial Mortgages. However, speak to your bank manager, as today they have access to other methods and innovative solutions, such as international trade credit finance.


  • Personal Savings – this could be a cash sum in a deposit account or funds held in a pension, insurance policy or investment scheme. An easy option, but not always the best option for the long term and we recommend you seek advice.


  • Selling personal assets – sometime a business owner may have a surplus personal asset, such as a vehicle, property or other business interest, that they can use to sell and raise monies.


  • Personal loans and credit cards – this may involve a new loan or card application or raising finance using an asset such as a property. Interest rates can fluctuate from low to very high depending on the type of funding option used.


  • Friends and Family – often the cheapest way to borrow money, but can also have its own complications. It is a good idea to keep the arrangement formal and in writing following the good practice of other lenders.


  • Investors / Equity Finance – this option involves selling shares in your business to an investor, who will take a share of any profits or losses that the company makes. This can be referred to as Seed funding. The investor may also lend additional monies, like a loan, and therefore repayment terms are applied for any monies additionally lent to the business. If there is a mix of lending and equity (or right to equity), then this may be referred to as Mezzanine finance.


  • Grants –  an amount of money given to an individual or business for a specific project or purpose. Sources include from the government, the European Union, local councils and charities. However, the availability of grants has reduced and there is much competition for any available. Click here to see some sources


  • Asset Finance – including hire / lease purchase – involves the leasing or renting of assets such as, but not limited to, machinery or office equipment. This can save you the initial outlay of buying them outright. For existing large capital assets in the business, the Sale and Leaseback schemes also appear popular.


  • Invoice Financing – Invoice discounting / Factoring – whereby you are advanced a percentage of your sales invoices with the balance paid on collection of the monies less fees. The provider can also offer credit control for you on a disclosed or non-disclosed basis. In the past, you had to finance all your invoices, but there are now lenders who will consider financing just one single invoice.


  • Crowdfunding – involves a number of people each investing or contributing smaller amounts of money to your business or idea. These various sums are then pooled to reach your funding target. In return you may offer equity with a return on investment or perhaps are ‘reward based’ such as providing a sample of your product or service. As an example, see Kickstarter.


  • Peer to Peer lending – similar concept to investment crowdfunding but you tend not to give away any equity and rather pay interest on the money you borrow, much like you would with a bank. For an example, see Funding Circle.


  • An initial public offering (IPO) – the first time that the stock of a private company is offered to the public. IPOs are often issued by smaller, younger companies seeking capital to expand, but they can also be done by large privately owned companies looking to become publicly traded.


  • Product Pre-Sales – involves selling your products before they are actually launched, receiving an advance from your customers.


  • An adjustment of your payment terms and improved credit control – reducing your payment terms or collecting your debtors quicker with effective credit control activities are often overlooked before businesses try to raise new cash. Are you collecting your debtors as efficiently as you can?


How to best raise finance for your business is just one of the areas we consider with you as part of our Business Improvement Programme.

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