Business finance options

What’s the best finance option for your business?

We’ve outlined some of the most common sources of financial support so that you can make an informed choice.

Finance from your bank

Banks offer a range of financial support options for your business. They can also provide advice on the most suitable route for you. The options presented to you may include:

A business loan over a fixed term

With this option, money is borrowed over a set period of time 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 may use an overdraft or credit cards to help them when cash levels are low or if the business is more seasonal. They can work if you need an extra source of money to dip into during quieter times, so that you can keep trading until the cash starts coming in again. Barclaycard Business credit cards are another way of providing you with short term credit. They are also a great way to manage and regulate staff spending.

Cashflow finance

This allows businesses to borrow against the value of their unpaid invoices. Using a cashflow finance solution means that within 24 hours1 of you issuing an approved invoice, you could receive up to 85% of its face value. You then receive the remainder of the invoice value (minus charges for the invoice financing service) when the invoice is paid by your customer.

Borrowing against assets

You can borrow money against a range of your company's assets, including property, inventory or equipment. The amount you could borrow will depend on the value of the asset, but this can be an effective way of raising cash for working capital or investment.

If you're looking to buy or remortgage business premises, you might consider talking to a Commercial Finance Broker or a Barclays Business Manager – they will provide independent advice, take you through the options available to you and deal directly with the lender on your behalf.

The 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 scheme may help. The scheme is available to those who meet the criteria specified by the British Business Bank.

Business grants

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.

Investment

Offering a share of your company (or equity) for an investment by a third party could be an effective way to raise cash. In contrast to a business loan from a bank, you may not 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 investment is often used for financing growth plans.

Family and friends

This is an option that a lot of people will consider, but it’s important to weigh up the pros and cons.

Benefits

  • An investment from family or friends can mean more flexibility – if they know you personally they may be more lenient with repayments and allow you to delay until your business is making a profit
  • You may be able to run a loan from friends and family alongside a business loan from your bank, as long as you know you can repay all of the money you borrow in line with the agreements that have been set in place

Considerations

  • Borrowing money or asking them to invest in your business is a serious commitment on both sides – everyone should be clear on the terms
  • Any ambiguities could risk damaging your relationship in the future, so it’s advisable to draw up a formal contract with help from an independent solicitor

If you have a Barclays Business account we can arrange a free session with a local solicitor for you – talk to your Barclays Business Manager to make the arrangements.

The article is intended for information purposes only. You should always seek independent advice before making changes to your business.

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