Serving over 2 Million visitors each year

Search
1 Year Fixed Rate Bond - With Santander you can enjoy the certainty of a guaranteed interest rate on your surplus cash for a fixed period. Find out more by calling us now on 0800 783 6911 or click here.

Small Business Funding – Borrowing options for small businesses

print  e-mail 

Many businesses will need to raise funds at some time – either at the start-up stage, or to fund ongoing expansion. With credit currently in short supply, here is an overview of the various options open to small businesses looking to raise funds.

Bank Overdraft

Many businesses will have an overdraft facility with their bank – this adds short term flexibility to provide cashflow when you encounter late payers, or to cope with an unforeseen expense. With instant access, you won’t need to consult your bank manager if you keep within your pre-agreed overdraft limit.

Business Loan

Rather like personal loans, there are a vast number of providers of business loans. Loans can be unsecured or secured, and have variable or fixed rates of interest. Unsecured business lending has also been scaled back due to the current economic climate. Read our guide to small business loans.

Asset Finance

This type of finance allows you to borrow against assets owned by the business. Leasing arrangements are essentially rental agreements with the finance company. The two main types are:

a) Direct Leasing, where the lender buys an asset from a company and the company “rents” it back from the lender.

b) Sale & Leaseback – Where a company sells an asset they already own, but still have access to the asset.

Invoice Finance

Specialist companies allow you to borrow against the value of invoices you have raised (but have yet to be settled). No other assets are required to secure invoice finance funding and you can typically receive up to 90% of the invoice value within 24 hours. You can read more in our dedicated guide to Invoice Finance and Factoring.

Small Firms Loan Guarantee Scheme

Many small businesses don’t have the financial history to borrow significant sums from traditional sources such as business loans. Backed by the Government, the Small Firms Loan Guarantee Scheme (SFLG scheme) allows qualifying businesses to borrow up to £250,000 over 2 to 10 years – with 75% of the loan value guaranteed by the Department for Business, Enterprise and Regulatory Reform (DBERR). You can read our overview of the SFLG Scheme here.

Please note that the SFLG scheme was suspended following the launch of the Enterprise Finance Guarantee (EFG) scheme in January 2009.

Commercial Mortgages

Commercial mortgages allow you to borrow against any property (or land) owned by the business. A type of commercial loan, the lender will have a legal claim over the property until the mortgage has been repaid in full. The range of commercial mortgage offerings has shrunk even quicker than the consumer mortgage market, but a range of fixed and variable rate mortgages are still available.

Investment Funding

In addition to the funding options discussed above, small businesses may elect to raise investment capital – such as Enterprise Capital Funds, business angels and other commercial investment companies. You can read more about these options in our dedicated guide to investment funding.

Posted July 11, 2008
Latest articles in Raising Money
 
8 reasons why a Business Angel might not invest in your business
How do poor investment propositions give themselves away? We take a look at eight reasons why business angels might decide against investing in your business. Avoid these common mistakes and you are far more likely to attract investors. [June 21, 2010]
 
Top tips on how to impress business angels
In the first of a series of articles on business angels, here are some tips from the Bytestart team on what business owners should do to impress potential investors. [April 28, 2010]
 
Start-up funding - how to choose the right business direction
When looking for business start-up funding, you’ll need to have a clear idea as to why you are launching the business. This foundation will shape the entire future of your venture and those offering business start-up funding will want to understand your reasoning. [February 5, 2010]
 
How to finance your business the non-Dragons’ Den way
We highlight five ways to fund your business, which don't rely on securing money from investors. [September 21, 2009]
 
Enterprise Finance Guarantee scheme - do your homework before applying
Small companies applying for the Government’s Enterprise Finance Guarantee (EFG) scheme are being urged to ‘do their homework’ in the face of stiff assessment criteria. [June 24, 2009]
 
Small business funding - what are the main sources of finance?
Most small businesses will, at some stage, seek funding or investment - for growth, starting up, or to see them through a transitional period (or a downturn). In this high level article, we look at the main sources of funding that are available. [May 28, 2009]
 
Business angels - what are they, and how they can help your business
A guide to business angels - what they are, what they can provide, and how to work out if an outside investor is the right person to seek for your small business. [May 26, 2009]
 
Angel investment - how to secure business funding
Businesses left struggling to find working capital or replacement to bank debt can instead turn to the rising prominence of angel investment as a viable alternative. Here are some top tips to help steer them through this sector: [May 6, 2009]
 
What are venture capitalists, and how do I attract their interest?
VCs invest money into businesses they believe have potential for significant growth. They get their returns by taking their share of the profits each year, or by getting a significant return on their investment when the business is sold. [April 16, 2009]
 
The Enterprise Finance Guarantee (EFG) Scheme
The government has announced the launch of the Enterprise Finance Guarantee Scheme (EFG). It aims to help businesses with a turnover of up to £25 million to secure bank loans of up to £1 million. [January 14, 2009]
 
Asset based lending flourishes as traditional funding dries up
As traditional sources of business funding have become harder to get hold of over the last year, more and more businesses are turning to alternative sources of finance, including asset based lending. We look at what this type of funding involves. [September 12, 2008]
 
Top tips for managing debtors and late payment
As late payment problems continue to blight the small business world, here are some golden rules for dealing with debtors during a downturn and ensuring that you keep on top of your cashflow management. [September 9, 2008]
 
Why a good credit rating is essential for small companies
With a 10% increase in business failures in the second quarter of 2008, it has never been more important for small companies to maintain a good credit rating. Article includes essential tips to maintain a good business credit score and a low risk profile. [August 4, 2008]
 
Small Business Funding – Borrowing options for small businesses
With credit currently in short supply, here is an overview of the various options open to small businesses looking to raise funds. Small business funding options include bank overdrafts, business loans, asset finance, invoice finance, and other types of investment funding. [July 11, 2008]
 
Business Valuation Guide - How to value a business
When it comes to selling a business, the most important question you need to ask is - how much is it worth? In this article, we look at some of the most commonly used valuation techniques, and how other factors may influence the value of a business at any given time. [June 25, 2008]
 




Click Here

Our Partners
Key Services
Key Services
Useful Guides

© Bytestart Limited 2005-2010 - All Rights Reserved | Terms of Use | Site List | Website Feeds | Rss Feed RSS Feed

Business Insurance, Business Bank Accounts, Public Liability Insurance, Professional Indemnity, Startups, Limited Company, Sole Trader