In the current economic climate, raising finance can prove a major challenge for your business, especially if you have no existing loans and therefore no contacts or experience in this area.

Fortunately there are quite a number of different ways of raising finance, some less obvious than others, and we look at a number here:

Bank Loan

This is likely to be the cheapest form of borrowing but banks being banks will require many hoops to be jumped through and much paperwork before they sign off on any kind of significant amount. Lending to small businesses though the Bank of England's Funding for Lending Scheme (FFL) is finally on the rise, according to recent figures, so funds are there to be accessed. Check out this step-by-step guide to obtaining a bank loan for information on how to maximise your chances of approval.

Start Up Loans

Start Up Loans is a Government-backed initiative to provide ‘soft’ loans to startup businesses. Loans can be up to £25k but average about £6k, and the interest rate is fixed at a modest 6%. The main restriction is that you must have been trading for 12 months or less so it really is for brand new businesses! Visit https://www.startuploans.co.uk/ for more information.

Small Business Grants

There are quite a number of start-up business grants available but they are highly sought-after, administered by many different agencies, and often have many caveats and strings attached. For these reasons they can be difficult to come by, and few grants come in the form of hard cash; many offer discounts, loans or free business mentoring etc.

Invoice finance

If you’re already trading but have a large number of unpaid invoices then invoice finance, or factoring, is a useful option to access working capital quickly. Factoring is a flexible form of loan where the factoring company advances money to a business based on its outstanding invoice value, plus it can also arrange to advance a portion of all new invoices raised. A valuable funding option in certain circumstances.

Crowdfunding

Crowdfunding sites (the best-known one probably is Kickstarter) allow members of the public to invest small amounts of money, as little as £10 each, in start-up businesses. Kickstarter alone has raised over £1 billion and helped launch thousands of new businesses and products, and there are many other sites including UK-based http://www.crowdfunder.co.uk/. Quite a lot of work is required to create a crowdfunding offer, and quirky and ‘cool’ products tend to be those that get funded, so it’s not suited to every business.

Sell Assets

One simple way to raise money is to sell something you already own and can do without. It may be a wrench to sell your pride and joy classic car, but you can look forward to using the funds to grow your business and hopefully buy another classic (or two or three!) in a few years’ time.

Don’t Sell - Borro

Featured across newspapers and TV, borro.com can lend money secured on valuable assets, and in fact have already loaned over £130 million since they launched in 2008 at the start of the recession (perfect timing). With borro.com you can unlock the value of your valuable jewellery, antiques, designer goods or the aforementioned classic car without having to sell them, although they can sell them for you too if you’re seeking a simple way to dispose of them for a good price. The APR on loans is around 50% so they should only really be used when absolutely necessary and for as short a time as possible.

There are many other sources of business finance which Kass Verjee, your local Financial Management Centre specialist can help you to access, so it’s well worth contacting him if you feel your business might need to borrow funds in the near future.