Types of funding

Commercial Loan and Mortgages

These are available to Companies and owners who either own or rent their property. A company can raise funds by remortgaging an owned building; or it can invest a proportion of its cash in a building it buys, as opposed to renting and it borrows the balance on a Commercial mortgage. There are a number of different types of loan and credit facilities from various finance providers. Needless to say, you should review the terms and rates carefully before committing to anything.

Equity

Usually Angels or Venture Capitalists will invest in a promising Company with growth and profit prospects, usually expecting to exit in 3-5 years with their money having grown at least 3 fold in the Interim.

They will usually require a proportion of the shares in the business reflecting their assessment of the risk. At the same time they will bring in funds and connections which will be beneficial to the company and may enable it to achieve its targets sooner than otherwise might be the case.
It does involve the owners giving away a share in their business in order to grow it, and sometimes the chemistry is a problem.

Factoring/Invoice Discounting

This is where a company buys your trade debts and pays you around 70% as soon as they receive a valid copy invoice. The balance, less charges, is paid once the customer pays. As a result of a court case, many of the banks are encouraging clients to use factoring and invoice discounting facilities in preference to more recognised forms of lending. Undeservedly, there has been some stigma attached to factoring and invoice discounting, but it can be useful for rapidly-growing businesses which sell to customers on credit.

Grants and awards

There are a number of grants and awards from bodies such as the European Union, the DTI, the National Lottery and UK Grant Making Trusts. They are not nearly as elusive as many believe if you know where to look, although the application process can be lengthy and time-consuming. More information is available in our grants section.

Trade Finance (Including International Trade Finance)

Trade Finance can be a very beneficial method of growing a company. The Funder stands in the shoes of the Company and contracts to pay Suppliers for the materials needed to fulfil orders.

The Supplier is guaranteed payment and often will give the Funder better terms than the original client, due to the financial strength of the Funder.

Materials can thus be bought, converted into product and delivered to the Client. The Client pays the Funder and the Company receives the Sales Value less the materials bill paid for by the Funder.

Stock Finance

There are a few 'junior' stock markets, such as London's Alternative Investment Market (AIM) and OFEX, where it is possible to raise Equity Finance for larger projects at costs and regulatory requirements well below the Stock Exchange levels.