With banks’
lending figures continuing to fall, thousands of entrepreneurs are looking for
alternative funding sources to get their business finances back on track. If
you’re one such entrepreneur, then this article provides a comprehensive guide
to the tools and options at your disposal.
Business
Overdrafts
For
companies with fluctuating income, a business overdraft facility from a
reliable finance company can provide quick and flexible cash flow. The idea of
getting a bank overdraft is simple- you dip into the overdraft in the months
where you are making less profits and come back out when the business picks up.
Most finance
providers charge interest only on the amount you overdraw, and many offer
tailored packages for startups.
Cash
Advances
Under the
terms of the cash advances agreement, the financier purchases a fixed
percentage of your future credit/debit card transactions at a discount, and
then advances the cash into your bank account, usually within 10 working days.
Repayments get scheduled at a pre-agreed percentage of every transaction –
usually between 10 and 20%.
With a cash
advance, you can secure up to £100,000 without the burden of fixed monthly
repayments, only paying the advance back when your customers pay you.
Asset Finance
An asset-based loan is similar to a mortgage. You borrow money against an existing
possession, and, if you fail to meet your obligations, the asset is
repossessed. Assets that can be used as collateral include accounts receivable,
property and premises, inventory and equipment.
Although
interest rates are often high, asset-based finance can be extremely useful for
a company, which is in urgent need of cash, or a business with a valuable
property that is yet to make major profits such as a hotel.
Factoring
If you
manage to impress an “angel investor”, they may provide investment in return
for an equity stake. Most angels that provide such investments are seasoned
entrepreneurs themselves, so they know what you’re going through.
Furthermore,
the process of finding and enticing an angel is far less challenging than you
might think. If you can put together a good pitch with realistic growth
projections to them, and are prepared to give up a share of your business, this
could be the route for you.
Crowdfunding
Crowdfunding
is an extension of the charity sponsorship page in the business world. People
come together on crowdfunding sites to pool money towards a particular venture
or an entrepreneurship idea. For instance, it could be ten people putting in
£500 each, or can be 3,000 people each giving £1.
Investors on
crowdfunding sites are typically private individuals providing small sums, so
they’re unlikely to give you the sort of grilling, and rigorous conditions as
an angel investor would. You can also scope out the popularity of your idea via
a crowdfunding site, and can also get some word-of-mouth marketing going there.
Micro-loans
If you only
need a small amount of money, you should think about a microloan. This type of
loan is tailored to your situation and can be used alongside funding from other
sources.
A number of
companies in the UK offer micro loans where they provide funding from £5,000 to
£25,000, with generous repayment terms ranging from 1 to 5 years.
Invoice
finance
Many
business owners have to provide customers with longer credit terms than they
receive from their suppliers, and their cash flow problems are then exacerbated
when they don’t pay on time. To avoid such a situation, invoice finance can be of great use to businesses if they can avoid a situation of
overgrowing debts.
When you use
an invoice discounting service, the finance providers pay you a predetermined
portion of the invoice as soon as it is received, and the balance is settled
when your customer pays in full.
Arranging
funds on a personal level and utilising it for business purposes can be equally
useful. Here are the few ways to get some extra cash:
Family loans
If you want
to keep things simple, a supportive family with money to spare can provide a
fair and reliable source of funding. Relatives are more likely to trust you
with their money than your bank, and they will probably demand lower interest
and fewer incentives too.
Use Your
Credit Rating To Stooze
Many credit
card companies are willing to lend you money at 0% interest, so why not use
this cash for everyday business spending.
This means
you'll now have debts on your 0% card (make sure you make the minimum repayment
each month) and a similar amount in your current account, which you can save in
a high interest savings account.
Pay off the
full balance before the 0% ends, having earned interest on the money saved.
This is known as stoozing. It's legal and can be profitable, yet it's only
useful if you are financially savvy.
Reclaim
Packaged Bank Account Fees
If you've
ever had a packaged bank account (where you pay £10-£20 per month for add-ons
such as travel insurance) that you didn't ask for, or couldn't use the
benefits, it’s likely you’ll be able to reclaim money.
There's
growing evidence that accounts were systemically mis-sold with many flogged
worthless added insurance. You may be able to reclaim £100s or £1,000s.
Switched energy in the last six years? Get £100s back within minutes
Surprisingly,
if you've switched your energy firm in the last six years and were in credit,
some providers operated on a 'don't ask, don't get' policy. That's mostly
changed now, but if you didn't get your money, even if it was years ago, you
can still claim for it. It only takes a minute or two.
Check Your
Tax Code – You Could Be Due Big Money
A National
Audit Office report exposed how over 3.2m people between April 2014 and Oct
2015 had an incorrect tax code. Some paid too much and are due cash back, others
too little and may have a horrid shock coming their way.
It is
dependent on how wrong your banding was, but it can range from tens of pounds
to thousands. One claimant was compensated over £5,000.
Find Lost
Assets
Billions
languish unused in old bank accounts, life assurance, Premium Bonds and
investments, whether forgotten in a house move, lost through a work change, or
simply overlooked in the hassles of modern life. Yet it's usually easy and, in
many cases, free to reclaim cash that belongs to you or your family.
Reclaim Bank
Charges
If you've
been hit with bank charges in the past few years and are currently in financial
hardship, you can ask for a refund. It all depends on your circumstances, but
if you incurred charges of £35, 4 times a year for the last 6 years, then on
average that all adds up to a huge £840 payback.
Regardless
of what finance model or provider you choose, they should be researched
thoroughly before you make commitments to ensure they are the best solution for
your business.
It is
recommended to research specific providers or funding platforms online and
speaking to other businesses which they have helped. You can even reclaim for
above mentioned products and make extra money to invest in your business. When
it comes to arranging funds, you need to have an approach where you are ready
to use every small opportunity that you have to make money, after all “many
little drops make an ocean”.
No comments:
Post a Comment