Business Finance Options

Many SMEs have needed to utilise finance options over the last year and a half to survive the challenges that the pandemic has presented. Nevertheless, finance can be a solution to support businesses at any time.

In this months blog, we want to look at business financing, and other options to ensure your business succeeds and grows this year.

However, before we get stuck in, the most important advice we can give is that, whether you are considering applying for finance or not, the best conversation you can have this year is with a Finance Director. Think of it as a health check for your business.

A Finance Director is the best-placed individual to make recommendations on your capital. Don’t deprive yourself of their expertise. Whether you are trying to decide if finance is your best option, or planning to make a pitch, get an expert involved. You will not regret it.

Let’s be clear about what we mean when we talk about finance. The Institute for Government makes the following distinction:

“Financing is how you meet the upfront costs of your infrastructure, funding is how you pay for it over its lifecycle, including paying back the finance from whichever source chosen.”

As such if you are considering applying for capital in order to sustain or develop an aspect of your business, you are applying for finance.

Current Government Support Related to COVID-19

Help to Grow Scheme – This scheme can be further divided:

  • Help to Grow Digital – advice and software to support development of your customer base and build online sales.
  • Help to Grow Management – a programme to help you improve your performance and growth potential.

Recovery Loan Scheme – finance for businesses allowing them to recover and grow following the impacts of the pandemic.

Restart Grant – a one off grant to support businesses when they restart as restrictions are lifted.

Traditional Business Finance Options

There are many options when it comes to business finance, the more common options are listed below.

  • Secured and Unsecured Business Loans – these options provide a medium to long term borrowing solution, either secured against an existing asset or agreed upon given the current financial standing for the business.
  • Invoice Finance – this option allows businesses to borrow against the value of unpaid invoices. This frees up invoiced funds without the delay commonly associated with invoice settlement.
  • Overdrafts and Credit Cards – given the evolution of business banking there are numerous options when to comes using these options to raise capital, however, they should be treated as a short term solution only.
  • Asset Finance – this option can be further divided, the main benefits for this kind of finance being that existing assets act as the required security.
  • Crowdfunding – an increasingly popular option for raising capital directly from your customer base and other interested parties. It can also be used to raise small amounts of capital relevant to very specific projects.
  • Angel Investment – an excellent way to raise cash at the outset of a business venture, typically from £10K to £500K, and usually facilities access to business advice from your investor.

You may find this free resource from the FSB useful for further reading: Business Basics: Finding the right finance for your business

Alternatives to Finance

While accessing a pot of cash is tempting to any business, it is by no means the only solution to raising finances to support your business development.

Prior to seeking financial input any business should make a thorough assessment of their income and expenditure. There is always room for improvement, and the amount you free up could surprise you.

Once you update your itemised list there will be items you find you no longer require, or that can be amalgamated with another service for a smaller fee.

This is never a pointless exercise and one we advocate on a regular basis, whether you later decide to apply for finance or not.

You may find the following articles on this topic helpful:

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