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10 proven ways to raise business finance

nick oshielEach week Nick O’ Shiel, Chief Executive, Omagh Enterprise Company, blogs on issues related to enterprise, technology and the economy. This week Nick explores 10 ways to raise finance.

Each week Nick O’ Shiel, Chief Executive, Omagh Enterprise Company, blogs on issues related to enterprise, technology and the economy. This week Nick explores 10 ways to raise finance.

 

Debt Finance

  • Commercial lending from the main banks still remains a key source of finance for entrepreneurs and business owners.
  • The banks assess the needs of the business and offer a loan dependant on cash-flow and the ability to repay and service the debt.
  • Asset Based Finance allows the business to borrow based on its assets such as property, machinery and stock.
  • It is a flexible form of finance that allows borrowing for a period of growth or to purchase a specialist piece of equipment.
  • Debtor Finance uses the money owed to the company by its debtors to inject immediate cash rather than wait for payments from customers.
  • It means the company gets its money faster but the amount paid is usually 80-90 per cent of what is owed.
  • Supply Chain Finance allows a company to get payment from its bank based on confirmation from creditable suppliers that invoices will be paid.
  • With this type of arrangement the company gets the full amount of the money owed rather than a discounted or reduced figure.
  • Trade Finance is used by companies that export to overseas markets as a way to reduce risk and fund the fulfilment of orders.
  • It is usually for a short period of time and dependent on proof of shipment but payment is made sooner than otherwise would be the case.
  • Mezzanine Finance is usually debt-based funding but can also be converted into equity if payment schedules are not met as agreed.
  • The finance is often tied to evidence that the business has the potential to increase its sales and profitability as a result of receiving the money.

Equity Finance

  • Business Angels are a growing source of finance for start-up companies as the angels invest their own money for a share of the business.
  • They will often take a personal interest and offer support, guidance and mentoring to the business in the early stages of development.
  • Venture Capital is popular with businesses that plan significant growth but it comes with a higher level of risk.
  • It is usually available at early stages of growth to companies with a clear business plan and exit strategy that enables the investor to earn a return within an agreed timescale.
  • Private Equity is invested in return for shares in a company and focussed on the long-term growth and profitability of the business.

Crowd Funding

  • Crowd Funding is used to raise money online for a specific project or idea and can be quicker than more traditional ways of getting finance.

So, raising finance can be a challenge but if you have the right idea there are many ways to get the money you need.