If you talk to any owner of a business or read the newspaper’s business section, you are likely to hear stories. About how hard it is for them to get enough money to grow or keep their business going. However, the way business owners obtain financing is beginning to change. With many actively seeking out alternative sources.
According to a survey
that was carried out by the Forum of Private Business in the United Kingdom. 26% of businesses were looking into alternative financial products, with 21% of those businesses doing so outside of the standard High Street lenders. In point of fact, a separate survey that was carried out in 2011 by the Federation of Small Businesses. It is revealed that only 35% of respondents made use of a conventional overdraft facility.
So, how can the rest of the UK’s business population finance growth? If banks are always reluctant to lend to businesses with the lowest risk? The following are a few of the increasingly popular alternative sources of funding that you should look into.
Better Management
of Working Capital. Although this may appear to be an odd source of financing, most businesses have cash reserves. That they have not yet discovered and can use to finance growth. In 2011, Deloitte released a report stating that the largest companies in the UK had £60 billion in idle working capital.
Your cash could be held up
indefinitely if your working capital—debtors, stock, and creditors—is handled improperly. By carefully examining credit procedures, the manner in which credit terms are granted. And the manner in which outstanding payments are pursued. Cash can be unlocked and returned to the system, making it possible to implement self-financed growth plans.
Another area
in which cash can be released to support. And finance growth is better inventory management, which ensures that stock is maintained at an optimal level. Examine your inventory management procedure carefully and locate cash-trapped areas.
In addition to
improving control over stock and debtors, effective working capital management maximizes creditor terms. By paying well in advance of the due date, are you overly eager to maintain first-class relationships with your suppliers? By taking full advantage of the terms offered by your suppliers, you can have a positive effect on your cash position. Have you fully utilized your position by seeking terms ranging from, say, thirty days to forty-five days?
Managing working capital
more effectively can free up sufficient funds to self-finance growth plans. Personal Resources Due to the difficulty of obtaining traditional sources of funding. Business owners are now turning to their own personal resources to finance expansion. Such sources are an immediate solution, whether it’s drawing on cash savings, using personal credit cards. Or taking out additional mortgages on residential properties. 33% of respondents to a survey conducted by the Federation of Small Businesses. It had used their savings to finance growth. In addition to being more readily available, personal resources frequently come at a lower cost.
Loved ones
Once in a while alluded to as the three F’s – family, companions and boneheads. This can have all the earmarks of being a less distressing approach to raising money. It can in some ways, but it can also be a dangerous journey. Taking advantage of their own organization entrepreneurs source finance. By either looking for a credit and proposing to pay a loan fee higher than that on offer. On a High Road investment account, or giving a cut of value in the business as a trade off for venture.
Because the request and its fulfillment
are heavily dependent on personal trust, raising funds in this manner may be relatively straightforward. Typically, a business plan would highlight both the investment opportunity and the risks. But ultimately, success is determined by trust and depth of relationship.
The possibility exists
If you don’t pay on time or at all, or even if you don’t pay at all. It can hurt the relationship forever, so be careful. Asset finance, which consists of invoice discounting, factoring. Funding of asset purchases, has been available as a source of finance for a considerable amount of time, but it has only recently begun to receive more attention.
The Asset Based Finance Association,
a trade group that represents the industry, has released data showing that the amount financed by its members during the third quarter of 2011 increased. By 9% compared to the same time last year.
help keep cash in a world where “cash is king” by financing the purchase of assets like vehicles, machinery, and equipment. Most of the time, there is no need for additional collateral because the financier is relying on the underlying asset as security. One in three UK businesses that have access to external financing now make use of asset finance, according to the Asset Finance and Leasing Association.
By facilitating quicker
access to cash held in the debtor book, asset financiers can speed up a company’s cash flow. Instead of waiting for the agreed-upon credit terms to expire. Businesses can immediately access up to 80% of an invoice through an invoice discounting and factoring facility. The company will be able to fund a rapid rate of growth thanks to these financing options, which will accelerate the flow of cash within the organization.
Market Invoice and other new players
are entering the market to make it possible for businesses to borrow money against specific invoices. Taking advantage of high total assets people and subsidizes Market Receipt goes about as a bartering house with funders ‘offering’ to progress against specific solicitations.
Peer-to-Peer and Crowdfunding The idea of using the power of the crowd to raise money is a relatively new phenomenon.
Depositors
have looked for new ways to boost their returns due to the historically low interest rates on savings. A market to bring these two parties together is only logical given that business owners are having trouble obtaining the necessary funding. In 2010, CrowdCube entered the market to connect businesses seeking capital funding with private investors seeking to become Dragons. After a company has passed the initial review stage, their proposal is posted on the website. There, potential investors can indicate the amount of money they want to invest, starting as low as £10.
Funding Circle
is an option for businesses seeking a loan that is more conventional. Established in 2010, Funding Circle also connects businesses seeking additional financing with individual investors seeking a higher return.
In order to take advantage
of the need for easier access to business finance and better returns for investors, more companies are likely to enter the crowd sourcing market as the concept develops. If you’re willing to look for other providers, it shouldn’t be difficult to obtain the financing you need to implement your growth strategies. The traditional High Street bank is no longer the only source of growth financing; instead, it is up to business owners to find other options.
