How to Get Business Funding

How to Get Business Funding..............

Whether you are looking to start up a new business or you are running an established business, one thing more than likely is that is that at some point in time you will require funding. It could be to help you start your journey or to help you to take your existing business to that next level, which ever situation, you will no doubt be wondering….what steps should you take?

There are really 4 questions you will always need to ask when you are looking for funding:

  1. How much do I need?
  2. What will I spend it on?
  3. How much profit/ cash will I generate?
  4. When will I make that profit/cash?

(The distinction between profit /cash is very important – businesses fail because they run out of cash- not because they do not make a profit)

Without the answers to these questions it is almost impossible to raise funding.

You will then have to supply a well-thought out Business Plan combined with a detailed, flexible and realistic Profit and Loss Forecast, (and more importantly Cash Flow forecast), as this will give the answers to those questions .

Finally you will then have to assess your own attitude, and that of any other business partner/s, to the various funding types, particularly between debt and equity. This consideration is either that you are prepared to give away a share of your business or that you are happy to accept the burden of debt attached to a loan.

Thereafter you will need advice to decide on the pros and cons of the various funding sources, who best to approach and what order with which to approach them in.

There are only three forms of finance:

  1. Debt – Though there are many forms, in essence you ”borrow” money and have to pay it back with interest over a specific time period
  2. Equity – Again there many types available but essentially you sell a share of your business to an investor who expects at some point in time to earn back multiples of the amount they have originally invested.
  3. Grants – Where typically you don’t repay funding but instead have to produce something which the granter wants – e.g. Jobs/ Research and Development/ Social Impact etc.

The level of interest on debt / equity required will be determined by various factors such as, the level of risk, how long the business has been going, the experience of the owners, the sector which the business is in etc.

But essentially if you put the right proposal in front of the right funder(s), it will get funded

The following is a list of some of the types of funding available:

  1. Bank Loans – Generally there is no unsecured lending and so any loans to the business will need to be secured by either Personal Guarantees, against Personal Assets, against Business assets or via the Enterprise Finance Guarantee Scheme
  2. In Greater Manchester there are a number of regional funds such as: Manchester Business Loan, Greater Manchester Loan Fund, Greater Manchester Investment Fund and Greater Manchester Export Finance Loan
  3. Asset Backed Lending – For New Equipment or Refinance existing equipment
  4. Land & Buildings –This has not been the most popular area but now the right deals are getting funded.
  5. Invoice Finance – Various types of Invoice finance such as Factoring, Confidential Invoice Discounting, One-off invoice discounting, Invoice crowdfunding, Lending against a debtor book.
  6. Trade Finance –Generally focussed on finished goods – and matched by a back to back order.
  7. Crowdfunding – Many equity sites that will either want a share of the business or take a “reward” for their contribution Many Debt sites – that will normally need trading history before pitching it to their investors.
  8. Pension Fund – Either borrowing from your pension fund or selling your IP to your pension fund for cash and then leasing the IP back
  9. Foreign Investment – Government scheme encourages £200k+ investments of debt or equity in return for allowing employment / visa to stay for fixed periods
  10. Various Regional Funds – Lancashire / Merseyside/ Cheshire
  11. Various sector funds especially for Digital and Creative Businesses – some grants / some interest free loans
  12. Business Angels North Business Angel Network – There is no pitching fee – No success fee Commercial Angel Networks typical pitching fees £1k / +5% success fee
  13. Other Funding
  14. Start Up Loan – 18+ personal loans <£25k
  15. Entrepreneurial Spark– this is an accelerator – free rent and mentoring support

This article was written by one of our valued partners:
Graham Niven Business Funding Specialist

If you require more information or advice on different forms of business funding or you require any other small business support in Manchester, please do not hesitate to contact us.

We Can Build Your Business in Manchester are happy to help grow your business!