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Congratulations, you’ve reached that first milestone; successful growth in your business from your initial funding. However if you’ve set your sights even higher, you now need to understand what other financing options are available.

1.Accessing bank finance

For most business owners in the start-up phase, bank finance in the form of loans or overdrafts is still not easily available until the company is able to demonstrate a financial track record to support the debt. Now that you have the beginnings of a track record, you can speak with your bank and see if you could be eligible to receive finance and on what terms.

You should expect to be asked to provide security in the form of charges over the assets of your business and in some cases your personal assets. The evidence suggests banks are still unwilling to help early stage businesses, so if the bank says “Sorry, we can’t help you”, what other options exist?

2. Purpose specific finance

There are many types of finance that have been developed to suit a specific purpose, so now is the time to concentrate on exactly what you need the funding for.

• Invoice Discounting – funding against your invoices leaving you responsible for collecting the monies owed by your clients, (a full factoring agreement includes outsourcing the collection of payment from your debtors and can be more expensive).
• Asset Finance allows you to purchase an asset and to pay for it over its economic life. The most common types of asset finance are leasing and hire purchase and involve using the asset as security. Personal guarantees may also be required.
• Trade Finance enables you to finance large orders by providing funding to pay suppliers before receiving final payment from the customer. This will involve bank guarantees or letters of credit from the banks/funders.
• Stock Finance allows you to buy additional stock or release a proportion of the cash tied up in existing stock against the security of these items.

In all cases, fees and interest will be payable and some of the fees can be quite complex so it is worth getting advice to make sure you fully understand any agreement you are entering into. You may also be required to give personal guarantees.

3. Alternative / Non Bank lenders

There are now more providers of finance for small businesses than ever before and the key to your growth is in establishing the most appropriate funding for your circumstances.Types of non-bank lenders include lenders offering cashflow support, a short term loan, revolving facilities or more specific funding such as Merchant Cash Advance. There are also specialist growth lenders, providing fixed term loans or flexible lending facilities to fund growth opportunities. Peer to Peer lending may also be available.

It’s imperative that you fully understand the cost and type of funding you are applying for, what the funding is designed to be used for, and how it will be repaid. You don’t want to choose something that is more expensive than necessary or is not appropriate for your funding requirement. A key point here is in understanding the cash flow of your business, especially if your business is seasonal.

There are a number of informative sites that are available to support small businesses in finding appropriate funding. Aggregator sites such as Funding Options, Alternative Business Funding or Funding Exchange help by setting out many of the financing options in one place. Independent brokers, who you can find through the National Association of Commercial Finance Brokers (NACFB), know the market well and their knowledge should help you to identify the right solution for you.

4. Equity investment

Equity investors provide capital by buying shares in your business with a view to a receiving a return through capital gain or dividends on successful growth in the future. This method of finance, where regular repayment of capital is not required, can support growth at the early stage. Equity investors are typically free to make investment decisions quickly and won’t require your personal assets to be part of the arrangement. You may also benefit from their knowledge, contacts and mentoring.However, the downsides are that it might take longer to find a suitable investor and you will also be giving up a share of your business. Of course, it also means someone else will have a say in your business, and whilst the equity investment in the short term will put less pressure on the early resources of your growing enterprise, if the business is a success then it may turn out to be an expensive source of funding in the end.

About Credit4

As a provider of finance for growing UK small businesses, we at Credit4 take pride in our relationship-led approach to lending. We have significant expertise in understanding the growing businesses we lend to, regardless of trading history, and look to provide innovative finance when other options may not be available.

Our Flexible Facility, is aimed at UK SMEs requiring short term business funding for growth and expansion for periods of between 3 and 12 months. Amounts of between £15,000 and £50,000 are available, which you can draw down, re-pay and re-draw as often as you like with a bullet repayment at the end of the term.

Our Dual Growth Funding combines the Flexible Facility with a term loan and provides total business funding facilities of between £50,000 and £100,000 for terms of between 12 and 24 months: 50% of the funding is provided as a term loan, repayable in equal monthly instalments, and 50% as a Flexible Facility, as above.

All the details of our innovative funding can be found on www.credit4.co.uk, which includes our repayment calculators allowing you to see the repayments and cost of finance for the amount of money you need for your business. Our funding does not require specific security to be given by the borrower, however, we do require adequate personal guarantees from the Directors / business principals.

Our eligibility checks and the initial stage of our process can be started on our web site (www.credit4.co.uk). After that, we will contact you to discuss your business aspirations and how we can possibly help. If appropriate, you will then be guided to start our full application process.