Different Types of Funding

Finance for business can be obtained by a number of different supplies.

Let’s review some of those channels to help you decide what’s right for your business needs:

Grants

There are over 930 different EU and UK grants and loans obtainable from over 100 issuing bodies. This is the cheapest form of finance and an important part of the funding package that companies and individuals need. We can help you find your way by this maze.

Technology

  • Micro Projects: 50% of eligible costs up to £20,000
  • Research project: For a technical and feasibility study of an inventive idea for new technology 60% of costs up to a grant of £75,000.
  • Development project: For development up to pre production 35% of costs up to a grant of £200,000
  • Developing an inventive idea: valuable for small companies and individuals at the start of a technical project: 75% of costs of hiring a mentor and consultants.

Export

To start exporting or moving into new markets grants of 50% of costs up to £20,000 each.

Training and Education

Knowledge move Partnerships, Achieving Best Practice in Your Business, Investors in People

Modern Apprenticeships

New Deal for various grants.

ecosystem

BOC Foundation for the ecosystem: 25% to 50% of Project cost, typically £20,000 to £100,000

Clean up Fund: Emission reducing equipment up to 75% of cost

Community Chest Fund: Up to £25,000 for projects near active SITA sites

High Impact Fund: £150,000+ for larger projects near SITA sites

Assisted Areas

Regional assistance grants of between 10 and 35% for capital expenditure in less favoured areas of the UK.

Loans

Loans are an excellent source of finance if you have appropriate security to borrow against or a reliable earnings stream. This needs to be planned and presented well to acquire funds.

Credit cards

Provides up to 56 days free credit if you play the game!

Overdraft

edges are surprisingly supportive when presented with a well thought by plan and competent management.

Bank Loans

Lenders tend to look for a good business plan and security. Typically the loan is approved by a centralised back office function instead of the person you meet. Terms and rates depend upon the risk. Repayments can be very flexible to meet your specific needs.

Mortgages

These can include flexible repayment terms to meet your business needs. This can already be incorporated into your overdraft finance so that you have one flexible explain both personal/ business mortgages and overdraft

Small Firms Loan Guarantee Scheme

Up to two years trading: Up to £100,000

Over two years trading: Up to £250,000

However these are difficult to acquire and are a loan of last resort.

Export Guarantee Scheme

This is government backed insurance against appropriate export documentation.

Mezzanine

This is a halfway house between loan and equity. It can be an inventive way of raising funds for the more established business. Mostly for expansion capital.

Equity

This is not as easy as the papers would have you know. Only 1% of business plans received by Venture Capital Funds are successful. However, a good business proposition consisting of a strong need for the product or service, management track record and a sound financial plan will enhance the chance of success.

Business Angels

These are high net worth individuals who are successful businessmen looking for investment opportunities. They can provide both time skill and money. Typical investment size is £25,000 to £250,000 but can go as high as £2m for the right opportunity. Exit within 3-5 years.

Venture Capital

These are investment funds seeking high rates of return. However typically investments are over a million pounds. Some funds are targeted at lower amounts depending upon the sector and vicinity. These funds are looking for exponential capital growth over 3-5 years.

Asset backed finance

This can cover machinery, sales invoices already sales orders. It can be a very flexible source of finance to the growing business

Leasing

This will cover your capital expenditure and spread the cost over a three to five year period. It is particularly useful if you do not have taxable profits to maximise your capital allowances.

Sale and leaseback of a character you own is another good source of funds.

Factoring

Factoring offers a sales ledger administration and debt collection service. Up to 95% of an approved sales invoice is paid within 48 hours, quicker if required. Credit protection is also obtainable to protect against a bad debt. The Factor will own and place a first charge over the book debts and they might also take other charges, depending upon the strength of the financial information.

Invoice discounting

Invoice Discounting can be secret or Disclosed; it depends upon the strength of the financial information. The service is the same as Factoring, except that the sales ledger administration and the debt collection is the responsibility of the client and not the Factor. Pre payment of the approved sales invoice is nevertheless up to 95% and the factor will nevertheless have a first charge on the book debt and consequently own the debt. This service can also have credit protection cover. All sales invoices need to be for a business to business debt, and some proof of delivery is generally required.

Trade Finance

This is funding provided against stock purchases, signed contracts and orders whereby the funder will prepay a certain percentage of the value

Pension fund

It may be possible to use your pension funds for a loan back to the business

Business Relationship Funding

This is another source of funds that can be overlooked. It may be possible to introduce possible alliances to add value to both parties. It may produce an ultimate exit route in the medium to long term.

    • Joint Ventures: Requires a legal agreement embodying the deal and another company
    • Partnerships: Two companies collaborate with possible funding.
    • Joint working relationships: These are an informal partnership which may be more project specific where the parties can proportion resources.
    • Agencies: These can be geographical or product specific and generally incorporates a payment for the right to the agency.
    • Distributors: Very like an agency but may not necessarily include up front payment.
    • Alliances: These do not require a separate company and can be embodied by a legal agreement to work together.
    • Trade investors: Otherwise known as Corporate Partnering. This can be a good way to include a much larger company in the business with a view to possible trade sale further down the line.
    • Associates: This can be a loose arrangement with no basic commitments either way, rather like a preferred supplier.
    • Equity Swop: Two companies exchange shares to a similar value to develop both businesses.
    • Franchises: This can allow the business to grow without further direct investment.
    • Licensing: This involves licensing a product or service to permit others to sell it. This requires you to own the intellectual character.

Leave a Reply