Whether you have a brand new start-up or a business that is already established, there will always be a need for finance options. Getting the right type of funding is important as personal lending and business lending do have their differences. Understanding what is available will make this option much easier to choose between and help give your business the cash injection it needs. Here is our short guide to finance for your business.
Personal & Short Term Loans
Many people will be familiar with personal loans and short term finance options, but these are usually only for personal financial matters. Loans for bad credit is a form of this where applicants with a poor credit history can still find the funds they need to cover unexpected expenses. This is ideal for entrepreneurs who need to keep their personal finances running smoothly alongside their business venture, especially when a financial emergency arises. In terms of credit for your business, a short term loan is not designed for this use. Personal loans allow those to borrow a cash amount up to £25,000 and choose how they want to use it. So, if investing in your business is one reason, it can be used for this purpose. However, there are specific business loans designed for this instead.
A business loan can be found through banks and finance companies and ranges from small to large loans. These are ideal to provide a cash injection during the early stages of your business, especially when needing to make a number of one-off purchases such as an investment in office furniture or a deposit on a commercial property. This can usually be unsecured meaning that no assets need to be attached to the loan to secure it, similarly to a personal loan. This is normally true for small business loans, but anything much higher than £100,000 and more would require collateral to be approved. There are specific start-up loans too which are a form of business finance for amounts under £25,000. Any type of business loan may require the bank or lender to see your business plan, so this will need to be considered.
With asset finance, you can borrow money to cover the costs of any equipment, property etc, and pay back with monthly instalments. This is ideal for the purpose of purchasing expensive items related to your business. You may have a business with a very specific need such as requiring a fleet of vehicles, office space, computer hardware etc. and the cost to pay outright is considerably high. Asset finance works similarly to a car loan or mortgage in that you can purchase what you need and it is secured against that property or asset. Usually, you will have an option of leasing or using hire purchase instead. Both types of asset finance may require a deposit to be paid upfront and then pre-agreed monthly instalments.
A modern approach to securing funds is by using crowdfunding platforms. This involves putting your business idea or plan online to attract investors who want to help raise the funds you need. You can usually put in a target amount you want to achieve and provide different levels required to invest. Here you can set requirements and incentives for donating a certain amount, for example, you could provide a gift as a thank you for a certain level of funds. Crowdfunding is similar to equity finance but usually does not involve giving away any of your company or ownership. It can be useful to raise funds and build interest around your business, especially for start-ups.
There are many avenues to explore when looking at finance options for your business. The above are just a few of the available types to consider. As with any type of finance, approvals are subject to credit status and assessment.