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Accessing Finance

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There are lots of different financing options available to businesses but its often difficult to identify alternative or mixed options for financing and this can depend on a number of factors.

  • Stage of business development

  • What your business needs to fund

  • The amount of funding required

  • The amount of risk

  • How quickly you require funding

  • Business Sector

Common financing options are:

Debt finance

Debt finance involves borrowing money, usually in the form of a loan or overdraft, and is the most widely available and frequently considered source of external finance for businesses.

In order to borrow money you will need to demonstrate to the lender that you have the ability to make repayment. In some circumstances security, such as a property, may also be required to guarantee the loan.

Equity finance & venture capital

Equity finance is a way of raising money by selling a shareholding in your business. This can be to an individual or to institutional investors who will seek growth on their initial investment. Venture capital is a form of equity finance where the investors generally seek rapid, high growth.

Business Angels are private individuals who are also seeking good growth potential from their investment, but they can also bring considerable commercial experience that can strengthen the management structure of a business they invest in.

Asset finance

Asset finance can be an attractive way of obtaining plant or equipment through a leasing or hire purchase arrangement, rather than an outright purchase. Asset finance:

  • allows you to spread the cost of new equipment over a period of time
  • provides tax incentives over owning equipment outright
  • does not require personal assets as security

Leasing arrangements can take various forms, but usually the lessor (the party from whom the equipment is leased) retains ownership of the asset over the period of the lease, typically 3-5 years.

With asset finance you will need to demonstrate that the business has the ability to make repayments from the outset, and you should remember that leases can be difficult to obtain on small or specialised pieces of plant and machinery.

Grants & other non-repayable assistance

Grants are sums of money which, once obtained, do not have to be repaid. They can have a valuable role, for example with research and development costs or to help bridge a gap before entering the market. However, it should be remembered that the application processes can be lengthy and most grant schemes will have conditions attached to the award of the funding. Grants are available through a number of sources including Europe. Dependent on the scale of the project, you may need specialist support to develop your bid.

For more information please contact the Membership Team    01905 673611

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