Different types of financing

Business finance can be obtained from a number of different sources.

Let’s review some of those channels to help you decide which one is right for your business needs:

subsidies

There are over 930 different EU and UK grants and loans available from over 100 awarding bodies. This is the cheapest form of financing and an important part of the financing package that businesses and individuals need. We can help you find your way through this maze.

Technology

• Microprojects: 50% of eligible costs up to £20,000
• Investigation project: For a technical and feasibility study of an innovative idea for a new technology, 60% of the costs up to a grant of £75,000.
• Development project: For development to pre-production 35% of costs up to a £200,000 grant
• Development of an innovative idea: Valuable for small businesses and individuals at the start of a technical project: 75% of the costs of hiring a mentor and consultants.

export

To start exporting or moving to new markets, 50% of costs up to £20,000 each are awarded.

training and education

Knowledge transfer associations, achieve best practices in your business, investors in people

modern learnings

New Deal for various grants.

Atmosphere

BOC Foundation for the Environment: 25% to 50% of project cost, typically £20,000 to £100,000

Cleaning background: Emission reduction equipment up to 75% of the cost

Community Chest Fund: Up to £25,000 for projects near active SITA sites

High Impact Fund: £150,000+ for larger projects close to SITA sites

Assisted Areas

Regional assistance grants of between 10 and 35% for capital expenditure in less favored areas of the UK.

loans

Loans are an excellent source of financing if you have adequate security to borrow or a reliable stream of earnings. This needs to be planned and presented well to get funding.

Credit cards

Provides up to 56 days of free credit if you play!

Overdraft

Banks are amazingly supportive when presented with a well thought out plan and competent management.

Bank loans

Lenders tend to look for a good business plan and security. Usually, the loan is approved by a centralized administrative function rather than the person you know. Terms and fees depend on risk. Refunds can be very flexible to meet your specific needs.

mortgages

These can include flexible payment terms to meet your business needs. This can even be incorporated into your overdraft financing so you have a flexible account for both personal/business mortgages and overdrafts.

Small Business Loan Guarantee Scheme

Up to two years of listing: Up to £100,000

Over two years of trading – up to £250,000

However, these are difficult to obtain and are a loan of last resort.

Export Guarantee Regime

This is government-backed insurance against proper export documentation.

Mezzanine

This is a house halfway between loan and equity. It can be an innovative way to raise funds for the more established business. Mainly for expansion capital.

Equity

This is not as easy as the newspapers want you to know. Only 1% of the business plans received by the Venture Capital Funds are successful. However, a good business proposition consisting of strong demand for the product or service, a track record of management, and a solid financial plan will increase the chances of success.

business angels

These are high net worth individuals who are successful businessmen looking for investment opportunities. They can provide expertise in time and money. The typical investment size is £25,000 to £250,000, but can go as high as £2 million for the right opportunity. Exit within 3-5 years.

Risk capital

They are investment funds that seek high rates of return. However, investments are typically in excess of £1 million. Some funds are earmarked for lower amounts depending on the sector and region. These funds seek exponential capital growth over 3-5 years.

Asset-backed finance

This can cover machinery, sales invoices, and even sales orders. It can be a very flexible source of financing for the growing business.

Lease

This will cover your capital expenditures and spread the cost over a period of three to five years. It is particularly useful if you have no taxable earnings to maximize your capital allocations.

Selling and leasing back a property you own is another good source of funds.

factoring

Factoring offers a sales book management and debt collection service. Up to 95% of an approved bill of sale is paid within 48 hours, faster if needed. Credit protection is also available to protect against bad debt. The Factor will own and place a first charge on the accounting debts and may also assume other charges, depending on the soundness of the financial information.

invoice discount

Bill discounting may be confidential or disclosed; depends on the strength of the financial information. The service is the same as Factoring, except that the administration of the sales book and debt collection is the responsibility of the client and not of the Factor. The prepayment of the approved bill of sale remains up to 95% and the factor will continue to have a first charge on the accounting debt and, therefore, the owner of the debt. This service may also have credit protection coverage. All bills of sale must be for a business-to-business debt, and some proof of delivery is usually required.

tradefinance

This is financing provided against the purchase of shares, signed contracts and orders for which the financier will pay in advance a certain percentage of the value

pension fund

It may be possible to use your pension funds for a return to business loan.

Financing of commercial relations

This is another source of funds that can be overlooked. It may be possible to introduce potential alliances to add value to both parties. It can produce a definitive exit route in the medium and long term.

• Joint Ventures: Requires a legal agreement incorporating the deal and another company
• Associations: Two companies are collaborating with possible financing.
• Joint working relationships: This is an informal partnership that can be more project specific where the parties can share resources.
• Agencies: These can be geographic or product specific and generally incorporate a fee for the agency fee.
• dealers: It’s a lot like an agency, but it may not necessarily involve an advance payment.
• Alliances: These do not require a separate company and can be incorporated through a legal agreement to work together.
• Business Investors: Also known as a Corporate Association. This can be a good way to get a much larger company involved in the business with an eye toward a possible business sale later.
• Associates: This can be a flexible arrangement with no fundamental commitments in any way, such as a preferred provider.
• Exchange of shares: Two companies exchange shares of a similar value to develop both businesses.
• Deductibles: This can allow the business to grow without further direct investment.
• License: This involves licensing a product or service to allow others to sell it. This requires that you own the intellectual property.