The Decision Finance guide to Raising Business Finance

Hundreds of companies go through our Decision Finance websites for commercial finance products every month.

For example, we have seen an increase in the number of start-ups applying for seed capital as well as an increase in the number of people looking grow existing businesses, either from an external position or as part of a Management Buy In/out.

All businesses, new or established, have one thing in common - they need to cash to continue to push sustainable profitable growth. So;

• where do you get this money?


• and, how much can you realistically expect to borrow with the different products out there?

Here is a quick guide

1. Personal Funds:
   
   Many business owners either use savings or re-mortgage a property, to secure initial funding to get a business moving. Providing these monies are accounted for as a 'directors loan' in the businesses accounts, this will be a sound base for initial cash flow.
   
   However, tying up your own money in your company is not without risk. Limited company directors have limited financial liability, but any funds put into the business will be swallowed up if things go bad.
   
   Click here for alternative finance quotes



2. Traditional Overdraft
   
   Many banks are happy to provide start-ups with an unsecured overdraft of up to about £10,000 - providing you have robust and documented business plans. If your requirement is greater than the £10,000 level, it is likely you will have to provide some form of security, either on the business itself, or in the form of a director's guarantee or even a charge on your home.
   
   Overdrafts above this level are subject to the discretion of the bank manager and the banks credit scoring procedures. Whilst the lending criteria are not disclosed by banks it is safe to assume your cash-flow and trading history will be taken into account.
   
   Click here for a business overdraft quotes



3. Asset Finance
   
   Just as you would consider hire purchase or contract hire for a car, so can many business purchases be funded in the same way - from commercial printers and vans, to plant & machinery all are fundable via Asset Finance.
   
   Different lenders have a range of charges and funding limits so it is worth shopping around. The amount they will lend against an asset, to either refinance or purchase new, depends on resale value so each asset is considered separately.
   
   Most commercial asset finance companies will require one year of accounts prior to lending any cash on this basis, however for some vehicles a personal hire purchase scheme could be a possibility.
   
   Click here for competitive asset finance quotes



4. Business Loan
   
   The unsecured business loan is sadly now nothing more than an urban myth and it is unlikely you will achieve any meaningful lend on this basis. However, lenders will give you a personal loan for business purposes with competitive rates over the term length that suits you.
   
   Businesses will not be able to borrow more than £25,000 on an unsecured basis, above this amount a bank will require some measure of security, usually a home or other property.
   
   The benefits include;
   
   
   • A loan can usually be used for any use - you determine how the cash is best used for your needs. Other types of finance can be secured upon particular assets which limit the use of the cash or increase your administrative burden.
   • Interest rates and repayment schedules are flexible and allow you to opt for fixed or variable rates.
   
   Click for the most competitive business loan quotes in the marketplace



5. Invoice Finance
   
   Many companies don't have tangible assets to borrow against - particularly with service providers - but what is present in every business is the sales ledger.
   
   The sales ledger is often overlooked for the value it has as and asset - more often than not sitting idly by and not capitalised upon. Most banks are moving overdraft clients to invoice finance as a progressive finance option because they can lend businesses a lot more when the amount is 'secured on an asset'.
   
   Rates can be very competitive, especially with a whole raft of specialist independent lenders keeping the product fresh and well priced against traditional overdrafts.
   
   Many lenders will advance as much as £900 against every £1,000 invoice raised, often making it the finance mechanism of choice for young businesses.
   
   This is fast growing finance sector with over 40,000 businesses using it already.
   
   Click here to compare a range of quotes
   
   Borrowing rates can often be as low as 5.5% for Invoice Finance products.

Do the research

I am the dedicated Decision Finance consultant and am here to help.

Please do not hesitate to give me a call (020 7920 8091) or drop me an email if you prefer (emma.moore@xbridge.com) and we can discuss the best options for your business.

Kind regards,

EMMA MOORE