SME Resources > Your Finance > Business funding

Business funding

Help your business find the wings to fly

Types and sources of funding

Businesses often get to a point where they need capital to expand or buy equipment. The question of where to find the money is another story. You need not only to find the funding, but also know what to do to meet the requirements.

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Loans

You can generally you can get business loans from two different sources:

  • Personal: Someone who knows you gives you some money with the expectation that you will give it back. This is often based on your relationship and will have no criteria for lending and often no security on the loan.
  • From a lender: A bank or a private or group lender (e.g. angel investor) gives you a loan with interest payments required, possibly security, and a solid body of evidence that you will be able to pay the money back

Tips

  • Make sure you have all the information ready 
  • Look carefully at the interest rates and length (term) of the loan. Both need to be appropriate for your project
  • Borrowing from family/friends can be useful sometimes but you still need to set some terms. This helps you plan for the future and have a realistic chance of paying them back
  • A well-managed loan in a company is not necessarily bad for the business
  • To understand what the bank will ask you for download HSBC's Applying to Borrow leaflet

Funding for lending

The Government has put a lot of money into lenders helping SME's have more access to loans. At the end of 2012 and start  of 2013, it invested a total of £70 million in a Business Angel Co-investment fund.

Lenders that were given access to Government capital in the investment include; Funding circleZopaBoost and CoCredit Asset Management.

 

Enterprise Finance Guarantee

The Government has also set up the Enterprise Finance Guarantee (EFG) scheme as part of the Funding for Lending programme.

They EFG will guarantee 75% of each individual loan under the scheme up to 20% of all the lenders claims in the scheme, making it easier for banks and other lenders to give loans to businesses that can't get a loan on standard terms. Companies still have to apply to the scheme through one of the 46 participating banks or lenders.

Grants

The great thing about grants is that you don’t have to give the money back. However, they normally take a while to get and will come with a number requirements and criteria.

One source of grants is the Regional Growth Fund. The Government set up the Regional Growth Fund which gives money to different areas, which then in turn award it to local SME's or projects. To find out if there is a project near you and for more information go to capitalforenterprise.gov.uk

Private equity

Private equity or venture capital is where a company gives you a large sum of money in exchange for a percentage of your business (equity). It is usually for a company that wants to raise more than the average business loan and does not mind giving up some of the control in the business. If you are planning a large expansion and plan to sell off the business it can be a good idea to do this. 

Alternatively you might want to sell part of the business to someone in exchange for both their investment and expertise.Find out more from the British Venture Capital Association or SMARTA on Venture Capital.

 

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Tools and assets

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RBS borrowing and finance options

RBS summary of different finance options for businesses

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Funding circle

Funding from investors without the middlemen

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UK Business Angels Association

Use the UKBAA website to find your angel funding

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Lending application checklist

Checklist from betterbusinessfinance.co.uk

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Business finance for you

Tool to help find local sources of funding

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B&F Business plans

Bespoke business plans for start ups and growth