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.
- 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.
- 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 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.