What business finance options are available?

For many businesses – especially new ventures that are not yet making money – the first option to think about is a loan or investment from friends or family. This could provide you with more flexibility, as you know the lender or investor personally. For instance, they may agree to you holding off on repayments until the business is making a profit, giving you time to build your business up.

You may also be able to run a loan from friends and family alongside a business loan from your bank, as long as all the money you borrow from all sources can be repaid in line with the agreements you make with these separate lenders.

Whilst borrowing from friends and family is often appropriate when starting up there are some things to consider. Borrowing money or asking them to invest in your business is a serious commitment on both sides so everyone involved needs to be clear about the terms and conditions of the deal otherwise you could risk damaging a personal relationship.

Drawing up a formal contract with the help of independent solicitors will help everyone know exactly where they stand. If you're a Barclays Business customer we can arrange a free session with a local solicitor for you – talk to your Barclays Business Manager.

Banks offer a range of ways to help you finance your business. They can also provide invaluable advice on the most suitable route for your circumstances. These include:

• A Business loan over a fixed term: Cash is borrowed over a set period and repaid with interest in agreed instalments – usually monthly. A business loan can be used for working capital or to support your medium and long-term plans.
• Business overdrafts and credit cards: Businesses often use an overdraft or credit cards to help them when cash levels are a little low or if the business is more seasonal. They're a way of having an extra source of cash to dip into in the quieter times so businesses can keep trading until the cash starts coming in again.  Barclaycard Business credit cards are another way of providing you with short term credit. These cards are subject to status and application and typically give up to 56 days interest free credit. They are also a great way to manage and regulate staff spending.
• Cashflow finance: Cashflow finance enables businesses to borrow against the value of their unpaid invoices. Using a cashflow finance solution means that within 24 hours ³ of you issuing an approved invoice, you could be receiving up to 85% of its face value into your account. You then receive the remainder of the invoice value (after deduction of the charges for the invoice financing service) when the invoice is paid by your customer. If you use a factoring service, the lender will also chase the payment on your behalf. Using the finances tied up in your invoices is one way to invest money in the growth of your business.
• Borrowing against assets: You can borrow money against a range of your company's assets, including property, inventory or equipment. The amount you can borrow will depend on the value of the asset, but this can be an effective way of raising cash for working capital or investment. Business funding for equipment or property is available through a range of leasing deals and  commercial mortgages  - if you're looking to buy or remortgage business premises, you might consider talking to a Commercial Finance Broker. They will provide independent advice and take you through the options available to you as well as dealing direct with the lender on your behalf. You can find a Commercial Finance Broker at the  Find a commercial finance broker  site. A Barclays Business Manager will also talk you through your options.

Enterprise Finance Guarantee (EFG) scheme

• If you've got a strong business idea or project, but are finding it difficult to get a loan agreed because of insufficient security to meet a lender's normal criteria, the  Enterprise Finance Guarantee (EFG) scheme  may be a solution.
  
• This is available to businesses with a turnover of up to £25 million subject to certain eligibility criteria specified by the Department for Business, Innovation and Skills. Loans of between £1,000 and £1 million are available through the scheme with the government guaranteeing 75% of the loan. For this security, a fee of 2% per year on the outstanding balance is payable quarterly to the Government (reduced to 1.5% through out 2009).
  
• Many UK banks – including Barclays – have signed up to the EFG. A Barclays Business Manager will talk you through your lending requirements and suggest applying for EFG if they feel it's appropriate.

A range of government grants are available under the Government Solutions for Business scheme, administered by a number of different bodies. Most are linked to specific activities, such as research and development. Government grants don't have to be repaid, so they won't be a drain on cashflow, but you will have to meet strict qualification criteria.

Often you will need to match the grant with money raised from other sources. You can find information on the grants available, eligibility and how to apply  Government Solutions for Business scheme

Offering a share of your company (or equity) for an investment by a third party can be an effective way to raise cash. In contrast to a business loan from a bank, you won't have to make any repayments on the money invested.

However, so-called angel investors (wealthy individuals who back businesses with their own money) and venture capitalists can strike a hard bargain in terms of the share of your company they take in return for their investment. This kind of business finance is often used for financing growth plans.