Individuals interested in starting their own business will often lack the funds necessary for establishment. Luckily, start up and company owners can benefit from several finance opportunities. Seven types of business finance in the UK tend to be particularly common and popular.
In this instance a company owner will look for an investor interested in purchasing some of the business and providing funding.
An experienced investor can help for the strategic development of the company. There are no interests or loan repayments to worry about. On the downside, the owner will be giving up some control, which could potentially result in decision making difficulties in the future.
The popularity of crowdfunding is growing all of the time. Depending on the company, its goals and its niche, it’s absolutely possible to generate enough funds through a crowdfunding campaign.
This type of finance involves having many individuals “donating” a small amount of money to a cause, a project or a business. Once again, there will be no interest rates or repayments. The problem with crowdfunding is that it may be difficult to convince people to donate. Unless they see the big picture and the appeal of the idea, individuals are going to refrain from giving money.
The most traditional form of business finance is readily available. A loan is provided by a bank or another financial institution. The loan will have to be repaid and an interest rate will have to be taken in consideration.
The problem with traditional bank loans is that many companies don’t get approved for such. In additions, the terms and conditions of making the repayment may be less than favourable. If no other funding options are available at that particular moment, however, a loan will be the opportunity to pursue.
The grant is any amount that a business or an individual get for the completion of a task or the execution of a project. Such grants are typically provided by governments, the European Union, municipalities and private organisations.
Finding a grant that you can apply to may be a bit of a challenge. In addition, you’ll have to understand and take in consideration all of the application requirements. A grant, however, doesn’t have to be paid back. You will not lose control of the company but get ready for intense competition when applying.
In the case of getting an overdraft, you’ll be allowed by a bank to spend more than what you currently have for a pre-determined period of time.
The overdraft gives you simplicity and convenience. It’s also cheaper than a loan. On the downside, an overdraft will have to be paid back. Many business owners go over the pre-determined overdraft limit because of how simple getting the funds is.
Companies can buy your unpaid invoices, improving your cash flow and giving you access to funds that will otherwise remain “frozen.”
This is another business financing opportunity that has been gaining a lot of popularity lately. Invoice financing is flexible and suitable for both small and large companies. In addition, the invoice financing service provider could facilitate debt collection.
On the downside, invoice financing is a service that comes with a fee. Finding the most attractive terms and conditions will be of uttermost importance for benefiting from this type of funding.
Leasing and Asset Finance
The final option to examine is leasing and asset finance. In this case, the business owner will be “renting” assets instead of having to pay the full price for buying those.
Leasing and asset finance gives companies access to state-of-the-art equipment. The interest rates are fixed and asset finance is widely available. Still, this option comes with a few shortcomings. Capital allowances can’t be claimed on the leased assets. In addition, leasing usually tends to be more expensive than directly buying assets.
There are many forms of business finance that your company can benefit from to increase your cash flow and invest into the growth of your company.