15 Ways to Fund Your Business Without A Bank Loan

Friday, March 9, 2018

15 Ways to Fund Your Business Without A Bank Loan

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.

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 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.
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”.

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