A business owner’s guide to borrowing money – part 2

In the second of our two part series Sage Business Expert Nicky Larkin explores more ways a business owner can borrow money.

Credit Cards

This can give you interest free funding if you pay your credit card in full when you receive your monthly statement. Many business credit cards expect you to pay the card in full, so make sure you understand whether you have to do this or not.

Tips

1. Shop around for 0% deals, cash back incentives, etc.
2. Pay on time with at least the minimum payment required to protect your credit score
3. Review credit cards regularly
4. If giving credit cards to staff ensure that you have a robust process to prevent misuse

Funding Circle

This is a marketplace for businesses looking for loans from multiple individual lenders. There are several similar offerings. The borrowing process is fairly painless as within a couple days a business is approved or not, given a credit score, and then is marketed on the site. Individuals can then decide whether to lend money or not. The loans may not be the cheapest available if you have excellent credit, but the process is straightforward and quick. It is however currently only available to limited companies with 2 years of accounts.

Tips

1. Look at other businesses on the site looking for lenders
2. Present your business favourably, demonstrating to potential lenders your growth potential and how you will be able to repay the loan. It is very important to be honest
3. If at the end of the process the interest rate and arrangement fee is deemed too expensive by you, you can decline the loan.

Grants

There are often pots of money by various government and non-government organisations to promote business. It is difficult to keep up to date with all the schemes, and some come and go very quickly. However, do ask your business consultants, accountants, bank managers to keep you up to date with any that they come across that may be available to you. Common ones are training initiatives , such as “Funding for Training” or grants for taking on apprentices. Be careful when applying as there are also a few grant scams around, so do check they are legitimate schemes.

LEP Loans

Many LEPS are offering funding to growing businesses. For example The Thames Valley Berkshire Local Enterprise Partnership has created a Funding Escalator, using money from Government, to help Berkshire businesses access finance. Companies with growth plans that are having difficulty raising funds from conventional sources may find this new source of funding suitable for their needs.

Tips

1. Approach your LEP to see what schemes they have in place.
2. Make sure you have a business plan and robust proposition for the applications.
3. Ensure that you understand the terms fully before signing.

Equity

Many business owners are nervous about “giving away” part of their business. However, equity funding can be extremely cost effective way to fund early stages of a business or take it to another level. This article focusses upon borrowing so won’t go into detail about equity funding, but it is a valid option that should be considered by business owners when financing their business.

Summary

Many businesses may be funded by a mixture of the above. As a business evolves it is important to review its borrowing options regularly, as some options may become more attractive as a business matures. Our Accounts Managers are happy to discuss with their clients all the funding options and recommend regular Business Reviews.

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