Whilst the prospect of securing funding may seem daunting, there are a number of different ways to source the required finance for your business.
Most fall into a number of main categories, but with any request for finance you should first ask yourself a number of simple questions: –
- What do you need the cash for?
- How much do you need and how soon?
- Can you afford the repayments?
- How long do you need the funding for?
- How much are you putting in yourself?
- What security can you offer?
Once you have the basis of your funding requirements and your proposals for repayment, you now need to marry these up with the various business funding solutions available.
Whilst you are no doubt an expert in your business field, the wealth of knowledge and understanding required of this market place is vast. This is where My Invoice Finance can assist you in finding the right finance solution for you and your business, saving you both time and money.
Understanding the different ways to finance your business
Bank Loans
A lump sum advance where typically you will pay back a fixed amount each month, with interest, for a set period of time. However, security by way of tangible assets (such as plant, machinery and equipment) and/or a personal guarantee will often be required.
Bank Overdrafts
A bank overdraft can provide quick, flexible cash flow. The bank usually sets an overdraft limit and you dip into it as required. Simple and easy to set up, however, over time many businesses end up relying on the facility and often remain overdrawn at the limit or indeed exceed it. An overdraft is repayable on demand and security in the form of a personal guarantee or charge over your company’s assets may be required.
Card Sales Cash Advances
A cash advance against future credit and debit card sales. It’s repaid via a pre-agreed percentage of the business’ card transactions. Typically, aimed at seasonal and retail businesses. No further security is normally required, however, the cost of the funds borrowed can be higher than other forms of finance.
Business Angels and Other Investors
Business angels or private entrepreneurs provide capital in return for a stake in your business. In addition to the capital, if you pick the right investor their advice and expertise may prove invaluable. However, you will need to give up a share of your business, as well as, some of the control. Convincing someone to invest may prove the biggest challenge.
Crowdfunding/Peer to Peer Loans
There are now a number of companies which manage the connection between companies looking to borrow and investors. Through an online portal, they share your finance request and supporting documentation with potential investors, from private individuals to investment funds. Once matched, the loan can be drawn at an agreed interest rate which gives the return to the investor.
Asset or Lease Finance
Used to acquire assets such as plant and machinery, computer equipment or vehicles. The asset purchased forms the security for the loan.
There are 3 main types of lease finance, operating leasing, finance leasing and contract hire. Dependant on the type of finance you choose, you either pay a nominal value to the leasing company for the asset at the end of the term or the asset is returned to the finance company.
Invoice Finance
Invoice Finance provides working capital to meet the day to day cash flow requirements of your business. The debtor book (sales ledger) of your company is used as the security for the finance company who advance an agreed % of the sales invoice value, in advance of payment from the customer.
Invoice finance enables a business to grow by providing continued working capital to fund future customer orders.
There are 3 main types of invoice finance:
Invoice Factoring – In addition to releasing the money tied up in unpaid invoices, the funder (factoring company) also takes control of chasing the debts, freeing up your company from the need to operate a credit control department.
Invoice Discounting – Here the funder (invoice discounter) also advances money against the sales ledger but the credit control responsibility remains with you and your company. Often invoice discounting remains confidential and your customers will not be aware the invoice has been funded.
Selective/Single Invoice Finance – The funder advances monies against a single or small selection of customers or invoices. Often with no ongoing contracts or tie in period.
At My Invoice Finance, we are here to help you obtain that much needed finance. If you would like to discuss your options, contact our specialist team on 0800 009 6106 or hello@myinvoicefinance.co.uk.
