Businesses need to seek various forms of external finance in order to create growth and make investments. This article is a guide to some of the most commonly used methods of seeking external financing.
Invoice Financing
Invoice financing – often referred to as debt factoring – is a method that companies use to free up money from invoices they are owed by clients. A company essentially ‘sells’ unpaid invoices to a business that then takes on the responsibility for getting those invoices paid. However, don’t just go to the first company you come across that offers this. First, head to debt factoring brokers, fundinvoice.co.uk, to get a free quote for factoring services. Whether you are a small, medium-sized, or huge enterprise, an independent company like FundInvoice can guide you in the right direction to saving money and still getting the benefits of invoice financing services. Moreover, businesses seeking alternative financing options can explore solutions like a Merchant Cash Advance, which offer flexible capital based on future credit card sales.
Term Loans
Term loans are a common type of external financing option that businesses can use to obtain a lump sum of money to finance a specific investment or project. In a term loan, a lender such as a bank provides the borrower with a set amount of money that is to be repaid over a specified term, typically ranging from one to ten years. The loan is usually repaid in regular installments that include both principal and interest, and the interest rate is often fixed for the duration of the loan.
Term loans can be secured or unsecured, meaning they may require collateral or not. Secured loans typically require assets such as property or inventory to be pledged as security against the loan, while unsecured loans do not. The amount that a business can borrow, as well as the interest rate and repayment terms, will depend on various factors, including the borrower’s creditworthiness, business financials, and the purpose of the loan.
There are also other types of loans you can take advantage of. For example, if you are a real estate wholesaler, you might find yourself needing 100% funding for a few days in order to complete double closing – where you have a property under contract to buy and you resell that house to a new buyer. In a case such as this, it can be good to take advantage of flash cash options with Pine Financial Group or other similar loan options. There is a loan available for just about anything, though be sure to research requirements and interest rates before committing.
Government Funding
The UK government provides various funding opportunities to support the growth and development of businesses. One such scheme is the Start Up Loans program, which offers new businesses the opportunity to borrow up to £25,000 at a low interest rate to help them get started. Another example is the Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS), which provide tax incentives to encourage investment in qualifying early-stage businesses. The government also offers grants and support for research and development through Innovate UK, and regional development funds such as the Northern Powerhouse Investment Fund and the Midlands Engine Investment Fund. Additionally, businesses can apply for funding from government-backed organizations such as the British Business Bank. By utilizing these funding opportunities, UK businesses can access external finance.
Venture Capital
Venture capital is a type of funding that is provided by investors to early-stage businesses with high growth potential. Startups typically seek out venture capital as an external source of finance to fund their operations, hire staff, develop their products, and expand their market reach. In exchange for their investment, venture capitalists receive an ownership stake in the company and the potential for a significant return on their investment if the company becomes successful. Venture capitalists often provide not only financial resources, but also strategic guidance and industry connections to help the startup succeed. This makes venture capital a popular option for entrepreneurs who need both funding and expertise to take their businesses to the next level.