Sources of Finance

Raising finance for businesses following the credit crunch and the recession is challenging to say the least. If you are thinking of expanding your business, or starting a new one, you will need to raise finance. This requires careful planning and good professional advice. You should consider raising finance from more than one source and aim to raise more money than you will need - quite often you may not get a second chance to raise funds from one source. Some of the more common sources are:

• Overdraft
• Loans
• Mortgage
• Selling an interest to a partner
• Share issue for your company
• Hire purchase
• Leasing
• Debt factoring
• Assistance from Government-backed schemes and from regional authorities, eg. Enterprise Finance Guarantee, EFG
• Venture capital
• Business angels

It is important to do a comparative study of the costs of each possibility, and also consider any tax implications before making a final decision about who to approach. This is an area where we have considerable experience, networks and expertise.

Most lenders will require some form of security. No amount of security will make a bad plan good, but it does demonstrate commitment from your side and provide insurance for the lender. As one banker recently said 'If they're not prepared to take a risk, why should we?' Generally acceptable forms of security include:

• Charge over a specific asset or class of assets e.g. car / debtors
• Fixed or floating charge over your business assets
• Second mortgage on your home
• Personal guarantees

If the lender requires personal guarantees you should proceed with great caution. Try to ensure that any such guarantees are limited in amount, if not in time. You will almost certainly be required to present a comprehensive and convincing business plan to show how you are going to service the loan. In essence, this must demonstrate that you will be able to meet the new commitment through sustained growth in your business.