How to finance your business

  • Are you a start-up looking to expand ?
  • Is your business in a recovery process?     or
  • Do you need money to sustain current levels of activity?.

    Funding options other than CBILLS

    Here are some of the most common ways to raise finance, as well as a few alternative options.

    Crowdfunding and peer-to-peer lending

    AIM – Alternative Investment Market allows businesses to seek funding from like-minded individuals at a lower cost than traditional offered by Bank.  P2P lendings are platforms where lenders place their money to lend to lots of different borrowers that can make up the loan amount they want and then repay their loans through the platform with interest, which the lenders then collect. P2P lending should be always regulated by FCA

    You can raise funds in exchange for shares in the business, through a Crowdfunding if your activity captures the interest of a group of people, who will club together to invest and have in exchange shares or a reward (a product ); or as a charitable donation.

    Overdrafts and Bank loans

    Overdrafts could provide the flexibility you need if you are looking for short term cash, but the interest rate may be higher than for an agreed loan if you’re using it over a longer term.

    Loans are often secured by a charge over assets and arranged for a set period with set repayment dates and fixed or variable interest rates. it is advisable to read the conditions carefully first.

    Credit Unions & Community Development Finance Associations

    Credit Unions offer to members good interest rates for borrowing small amounts. They operate on a not-for-profit basis to support local individuals and businesses, but often members should have an agreed amount in savings for around three months before borrowing.

    Community Development Finance Associations (CDFAs) operate in a similar way to Credit Unions, using the money saved by members of the local community and recycling it to provide affordable finance. Visit for details of local lenders .

    Government venture capital schemes

    The government offers four venture capital schemes: Seed Enterprise Investment Scheme (SEIS), Venture capital trust (VCT), Enterprise Investment Scheme (EIS) and Social Investment Tax Relief (SITR). The most commonly used are the start-up SEIS and EIS for more established businesses.

    Cesca Accounting provides some insights into how to effectively advise on these schemes in this article.

    Equity finance

    To generate finance, businesses can offer up shares to investors, whether they are friends and family or a private investor.

    Business Angels are organizations able to provide financing of up to £2 million and also offer advice on how to make the business more profitable.

    Invoice factoring and discounting

    Both work on the basis of short-term borrowing against your outstanding invoices (usually around 80-90% of your invoice value).

    Invoice factoring and discounting offer better interest rates than bank borrowing. They can be a good option to ease cash flow and also to balance short- term and long-term liabilities in your financial statements.

    With invoice factoring a third party finance company chases your debtors, with invoice discounting you remain responsible for collecting payments from your debtors. Invoice discounting is more readily available to businesses with turnovers over 100,000 and with a positive net worth on their balance sheets. Interest rates are generally better with invoice factoring.

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