Business finance options for your company

Needing an injection of finance to support your business operations is perfectly normal.

There may though be a variety of approaches that are available, some of which may be more suitable for certain business circumstances than others.

Matching your requirements to generic types of solution

Your enterprise might be in any one of the following situations:

  • looking for financial assistance to support business expansion;
  • needing to address a short-term working capital problem caused by any one of a number of reasons, including possibly cash-flow difficulties in terms of getting your invoices paid by your clients;
  • engaging in the purchase of a major piece of plant or equipment; etc.

There may be business finance options that are more suitable for some of these than others.

The principles of the solutions available

The type of business finance options open to you might fall into the following categories:

  • debt finance. Although this may sound slightly alarming, the “debt” here merely relates to the fact that you will be borrowing a lump sum. You will repay it over time and the outstanding loan naturally adds to the debt burden of your organisation, as reflected in your books of accounts. This generic type of solution is best illustrated by thinking about conventional bank loans for business purposes;
  • asset re-finance. This typically involves you borrowing money against equity you might already have in things such as property, plant and equipment;
  • invoice discounting and invoice factoring. These approaches allow you to gain access to the money locked up in your unpaid invoices that bit faster;
  • equity finance. This might mean offering an investor or other third parties, a share in the ownership of your business – perhaps for a specified period of time. In return for injecting money into your organisation, the investors will normally expect a higher rate of return through their equity and possibly also a degree of say in how your business is managed;
  • asset finance. This is another stream of financial assistance, usually targeted at assisting an enterprise to purchase a major asset. Options in this category might include things such as Hire Purchase (HP) and various forms of leasing.

Which is suitable for you?

At ACF Direct we know that it is impossible to say which of the above business finance options (there may be others) might be appropriate without knowing more about your organisation and its exact financial needs.

Simply making random applications for multiple types of finance, in the hope that you achieve success with one, is typically not recommended. It is usually advisable to get expert input to your decision-making processes and to follow that up with a targeted application to a provider that you know is likely to be sympathetic to your particular situation.

What you will need

What potential lenders or finance injectors will need to see may vary depending upon how much you are looking to borrow, for what purposes and how.

However, some general points to consider might include:

  • your application will need to be supported by some indication, usually in the form of business accounts, showing that your company is successful and viable going forward;
  • in some perhaps more unusual situations, the approach may necessitate the provision of directors’ guarantees. Should that arise, the guaranteeing directors may be subject to a credit check. Otherwise, your business itself will be subject to a standard commercial credit check;
  • facilities are normally advanced only to separate legal entities, i.e. limited companies. Sole traders or partnerships may need to seek alternative funding approaches.

Next steps

Appropriately selected and used, business finance can be a powerful tool to help drive your company forward.

It is a highly specialised area though and taking advice at the earliest stages is recommended.