Raising Finance, Re-finance and Soft Loans
Securing the right type of affordable funding for their companies is a constant cause of concern for managing directors. Funding solutions are available for every stage of a company’s growth, from concept to a successful listing or trade sale, and even for those that are in distress.
ibd has many specialist members, based around the UK, who are experienced in raising finance of all types. Here are some options depending on a company’s situation:
Start-up companies will always have problems with obtaining finance from banks, so most must be self-funded from family and friends and often need to resort to personal measures such as re-mortgaging of the family home, but there are some start up loans available.
High-growth start-ups can look at Angel Funding, which comes in two forms; as an equity investment or as a commercial loan. One of the neglected forms of Angel Funding is the recruitment of a non-executive chairman who may have both capital and industry knowledge, and with it contacts, to invest. Invoice Discounting, also referred to as or Factoring or the selling of your debtor ledger, is another attractive way of enhancing cash flow for both start-up and growth companies.
Growth companies have a greater range of funding options available to them, including those mentioned above. Bank loans are usually the least expensive form of borrowing, either in the form of an overdraft or a commercial loan, but a company must be prepared to give personal guarantees – this risk can be insured separately. If a bank is proving to be difficult then a re-banking exercise should be considered. If all personal assets have already been expended, then the Government backed EFG Loan may be the answer. Mezzanine loans are also available from government backed Regional Trusts, but can prove expensive.
Trade finance for importing products from abroad or for buying components for manufacturing is available, if you already have firm orders from your clients.
Stock funding can be arranged if the stock is easily identifiable and has a ready re-sale market. This type of finance is not the easiest to come by however.
Many growth companies have ‘forgotten’ assets that they already own that can be used to raise much-needed cash flow, by using sale and leaseback techniques. Leasing plant, machinery, IT equipment and vehicles not only eases cash flow but is also tax efficient.
Commercial mortgages and bridging loans can be arranged for the purchase of offices, warehouses and industrial units.
Distressed companies do also have a few options available to them. Sale and leaseback of existing, unencumbered assets, even if the balance sheet is negative, is offered by several specialised organisations. There is also a network of turnaround angels that only invest in companies which at one time had been successful but that have now hit hard times and need an injection of new capital to turn them around.
ibd has advisers with in-depth experience of commercial finance across all business sectors.
Whatever stage of growth your company is at, there is a source of funds suitable for you. Often funding will come from more than one source and it is always advisable to approach multiple sources at the same time.
If you would like to know more about our commercial finance capabilities, please contact the ibd head office on 01223 257777 or by sending an email to [email protected]