A search of the internet is likely to reveal any number of websites offering business financing tips for those wanting to start up their own business. The government itself offers a wealth of information targeted towards such start-ups.
But what it you are an established company, already having traded for a number of years, and with a proven track record of a reliable income stream – what tips and suggestions are likely to be more appropriate?
When considering your options, here are the ones you are most likely to encounter – together with tips about the suitability of each:
- if you are an established business, you might still want to consider selling some share in your company by way of equity finance;
- just as the term suggests, however, it involves the sale of a share of your business – and some investors may also look for a degree of decision-making responsibility too;
- furthermore, many equity investors – venture capitalists – may be more interested in the riskier business of investing in new, start-up companies;
- for debt finance, you might consider an application to your local bank;
- but be prepared for a demand for a detailed business plan in support of your application, together with detailed cashflow projections – not to mention a typically longish wait of several weeks before your request is considered, approved or turned down;
- an increasing volume of business finance these days comes from alternative balance sheet lenders who have taken on the role previously performed by banks in the shape of business loans;
- business finance in this form is by way of short-term, fixed rate, unsecured loans made by lenders who share your entrepreneurial spirit and have a keen understanding of the strengths and weaknesses that make companies financially viable. For example, in the U.S., USDA Business & Industry (B&I) Loan Program provides financial backing for rural businesses. However, business firms who want to opt this option might need to first check out usda rural development eligibility map to see whether they qualify for the loan program;
- a considerable advantage offered by these lenders is the ready accessibility to loans online;
- the online application process is simple and straight forward, beginning with an approval in principle of your initial enquiry;
- the next step is your formal application, which the lender evaluates in terms of the standing and financial health of your company;
- if formal approval is then forthcoming, the requested funds are typically transferred directly to your company bank account within the next couple of days;
- business loans from these sources usually range according to the financial regulations of different countries. For example in U.K., it ranges from as little as 5,000, right up to a maximum of 100,000 – although the funds requested in the majority of cases usually fall below 50,000;
- an alternative source of business finance is from so-called peer-to-peer lenders;
- these are online platforms set up to match deposits from investors and savers to companies and businesses looking to borrow;
- the lending platform takes none of the risks involved in the business loans arranged in this manner – acting solely as a matchmaker or go-between;
- therefore, the lender is likely to take considerably less informed interest in the way your company runs, its cashflow capabilities, and your ability to manage loan repayments than the balance sheet lenders mentioned above.
If you are an established company looking to raise business finance, therefore, you might want to avoid the necessity for selling shares in your business to attract equity investment and instead look to the informed, fully risk conscious availability of business loans from a balance sheet lender.