How To Get Business Finance in 2017
There are a number of options ...
POSTED BY JONATHAN VOWLES ON 28/03/2017 @ 8:00AM
Some businesses don't need to worry about finance, but quite a lot do, especially the smaller ones. So what sources of funding can you access if you run a business?
There are a number of business finance options available to you!
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More importantly, how can you position your business to make it more likely that you will be granted the finance you want? And if you are a start-up what can you do to get funding?
"Read on for some answers to these interesting questions!"
There are plenty of sources of finance out there and, for ease of this blog post, I am going to group them into 3 simple categories: personal finance, traditional business finance and 21st Century business finance.
What is also important to recognise is that as we get different sources of funding coming on to the market, it is more and more important to consider the use of a finance broker to navigate through the various options. Especially if your circumstances are not simple or straightforward:
If you are a small or a start-up business then your own resources are going to be the first port of call.
One important tip, if you are thinking of starting a business, consider re-mortgaging before you make the jump! If you run your own business, then most mortgage lenders will want to look at 2 years' worth of accounts before considering you for a mortgage or remortgage.
Releasing money from your own mortgage is often achievable, but clearly it depends upon your circumstances.
You might be tempted to use up your credit cards, but this is an area where you need to exercise caution. Credit cards are for emergencies or for routine costs that get paid off every month, not for long term finance.
Personal loans, either from the banks or from family are another possibility. However, you need to carefully consider the risks and downsides before going ahead.
If you are thinking of getting a mortgage, them you will probably need to use a mortgage broker to find a good deal, but most personal finance sources are ones that you can sort out yourself without too much fuss and bother.
Traditional Business Finance
By this, I mean using your High Street banks for commercial mortgages, commercial loans or business overdrafts. The banks are all lending, but they have criteria that you have to meet before they consider lending to you! This means that your circumstances are really important and you might not meet their criteria.
The good news is that every bank has different criteria and they vary or flex them. Often their criteria will vary over the course of a year depending on that bank's lending targets and lending strategy. It goes further than that, as often one bank manager will interpret the criteria differently to another manager of the same bank!
The good news is that by chatting to your bank manager, they will quickly identify what they can, or can't, do to help you. But do exercise caution here. Don't do the tour of going around all the banks on your own. Speak to your normal bank manager and if they can't help, stop there and consult an expert broker!
If you do the rounds and get a resounding no from each bank and then consult a broker, that broker is going to find it tough to go back and get a yes from a bank that has already said no!
21st Century Business Finance
It seems that every few years a new variation on ways to lend money to businesses comes along. You might be aware of some of the potential sources I am listing out here, but probably not all. And this is a simplified list!
This is frequently the area that a finance broker will actually be the one that makes a difference for you. Because they do that thing that you want - they can see how your business and your circumstances will fit with the different lenders, how they do business and know which lender will want to do business with you.
Invoice discounting or factoring - Factoring isn't right for every business. But for some it can often be the difference between success and failure. Some of the big banks do factoring, but you can often get a better deal with a local or niche factoring company.
Asset finance for both leasing and purchase of equipment or vehicles - this is ideal for most business and is often a great way of making things happen. There are always plenty of options to access this sort of finance from liaising with the supplier, going to your bank or going to a specialist funder.
Peer-to-peer or crowd funding - this is a growing and exciting area of lending. But one where you will need help either from a broker or from the peer-to-peer company to make it happen.
Debtor finance - there are some very innovative lenders in this area! Lenders who will work to provide you with a loan or overdraft ...and provide finance in a way that the High Street banks are simply unable to. I am seeing a huge and exciting growth in this area of lending.
One point to note is that innovative lenders will often take risks that the High Street banks won't. Or, to put this into context, your interest rate will be one or two percent higher (and sometimes more), than dealing with the High Street Banks, but it also means that those alternative lenders will help you when the Banks won't.
Frequently you will need to use a broker simply be made aware of the range of options you have, which is where JVCA comes in. Get in touch on 01234 752 566 or click here to send me an email enquiry and see how we can help!
Until next time ...
If you're looking for a new accountant to help grow your business, do visit www.jvca.co.uk and discover how Jonathan Vowles Chartered Accountants can help you!
I've been an accountant in and for business since 1987 and have a wide experience of consultancy, audit, accounts, taxation and wealth planning work from individuals and small businesses to multinational corporations and charities.
My eclectic interests in growing and developing business span a number of areas … and can be summarised as strategic business advice and tax saving advice.
I have worked with the Chamber of Commerce to deliver courses for people about starting up in business and have lectured about tax for a major accountancy practice and for Milton Keynes College.
I relax by reading fiction and by getting away from the office in a campervan.