7 Ways to raise £100,000
In today’s economy, is it possible to raise money? Below are a few options you could consider when looking to raise £100,000 for your business.
Commercial lending, especially commercial and buy to let and bridging loans, is down 60% year on year compared to 2008. In fact all forms of commercial lending have seen a fall, except for invoice finance, which for many businesses has been a saving grace.
Since 2008 the use of invoice finance has increased 20%, showing that lenders are still keen for this form of finance.
In the current economic climate it can be difficult to raise finance for a business, yet it doesn’t stop the need for funding in order to start, grow or even sustain business activity.
Option 1 – Family and friends
This is typically one of the cheapest and most flexible ways to raise money for a business. By borrowing money from friends or family people accrue less debt and are likely to only borrow what they need.
However, it is important to remember that there are possible issues with borrowing money from friends and family. What if the business isn’t successful or the person loaning the money wants to be involved in the business day to day. Are the risks higher than the reward – would you be willing to risk relationships with friends and family.
Option 2 – Release funds from unpaid invoices
With over a million UK businesses affected by the late payment of invoices, business growth is being heavily hindered. Some cases are severe enough that the lack of cash flowing into the business is threatening its future.
With invoice finance it is possible to release up to 90% of the cash tied up in your sales ledger, with the cash typically made available to you within 24 hours of raising invoices.
With more than 20 lenders currently in the market, you are sure to find a suitable partner who could provide the required finance to get your business on track and help fuel its growth.
If you raise invoices to other businesses and you have a projected turnover exceeding £50,000 in the next twelve months then you could be eligible to use invoice finance.
Option 3 – Enterprise Finance Guarantee
Enterprise Finance Guarantee (EFG) has been set up by the government in order to support businesses that need financial assistant but do not have the collateral necessary to secure funding.
To tackle this problem the government will back 75% of a loan, which can range between £10,000 and £100,000 with repayment terms between 3-10 years.
This scheme is also a viable option for both startup and well established businesses that have a solid business plan and budget in place to demonstrate that the loan repayment isn’t an issue.
For more information on invoice EFG you should contact your local bank who can discuss the scheme and evaluate your eligibility.
Option 4 – Bank Overdraft
Utilising a bank overdraft is one of the most popular forms of finance for new and growing businesses alike. However funding in this way has a few disadvantages that should be considered:
- This function can be recalled by the bank at any time
- You could be given an insufficient overdraft which doesn’t allow you to operate
- It is an inflexible way to borrow money.
(See our business advice article on Overdrafts and Bank Loans for more details)
Option 5 – Refinance property
Although there has been a considerable fall in commercial mortgage lending there are positive signs that the market is picking up, potentially giving you the opportunity to release cash that is tied up in your property.
A quick call to your local independent mortgage broker will give you a better idea on how much cash you could raise against your property.
Option 6 – Asset based lending
This is another option when considering releasing cash tied up in your business assets. You could review the cash you have tied up in such assets as equipment, property and your sales ledger, i.e. your debtor book.
Asset based lending is one of a handful of commercial finance tools that has actually seen growth in businesses during the recession. This is due to the lenders opting to lend money secured against assets which have a resale value, providing lenders with the necessary collateral.
Option 7 – Angel Investor
An Angel Investor is a person who provides finance to start-ups in exchange for equity in the company. In addition to providing finance an Angel Investor can also provide advice and support ongoing, for example introducing you to their contacts to assist with business growth.
Business Angels act on an individual basis and as part of wider investor groups, where cash, resources and contacts are pooled. If you’re interested in finding out more, the UK Business Angels Association (UKBAA) is a useful start point.
Having a robust business plan, a strong knowledge of your target market and a credible pitch could help you secure finance from an Angel Investor. Your business plan today will determine your success tomorrow.
About the author: Touch Financial is an independent factoring broker, working with over 20 of the UK’s leading factoring companies.