It’s official: the recession has ended and the economic recovery is getting traction in the North of England. But developing and expanding your business often requires capital. Why is this? New and expanding businesses often need equipment, it can take a month or two to get customers to pay, and initially new ventures often lose money whilst they are getting established. So where can you find finance?
Bank. If i was to choose a challenging career it would be to work in the PR department of a bank. They are treated as pantomime villains, booed when you mention their names. But yet all the people i meet who work in banks are decent people who care about their customers. Banks are the traditional source of funds for small businesses and should not be ignored. Your bank manager should help you through the bank’s admin to give you funding. If your bank manager is unhelpful the first thing to do is to change manager or change bank so you have a helpful one! Let me know if you need help finding a good one.
What banks cannot be expected to do is to take on equity risk for debit return. What i mean by this is you cant expect to give the banks say 6% interest but for them to take most of the risk of business failure – and for you to take the rewards if it succeeds. To mitigate this risk they will require personal guarantees, security or to know that there are substantial funds invested in the business. If you are uncomfortable giving this this security read on!
Loans from Investors. If your business has a profitable trading history, you might get loans from third parties such as Funding Circle, where individuals make loans directly to businesses. They may still require a personal guarantee. The advantage is that the investor gets a good rate of interest and you get money quickly at a higher but reasonable interest rate.
Factoring is where you raise money secured against money owed to you by your customers. When people lend to you they want to make sure they get their money back, to do this they’ll want security. This could be over your property, your fixed asests of your debts. Factoring got a bad name because ti can be expensive, but if your main asset is your debtors’ ledgar, it might be for you, and I’ve seen several excellent factoring relationships.
New Shareholders. You shouldn’t give your equity interest away lightly, after all it’s the shareholders who take the profits from the business and gets a payout if you sell it. But obtaining new shareholders can add new skills to the business and stabilise it’s finances.
Free money. There is some government help available if you are creating jobs.
Of course if you want to expand your business and want to discuss how it can be financed please ring me or any of my team to discuss your individual circumstances in more detail.
You can ring me, James Sheard on 0161 303 0610
or take a look at the website…