High Street Banks
The first port of call for most borrowers will, quite rightly, be a High Street bank, who should have a range of financial products to meet their needs. “An overdraft is a useful, flexible arrangement, but it’s
important to remember that an overdraft is repayable on demand and the bank can call it in if they are unhappy with the way it is being operated”, says Ian Smallwood, Head of Business Services at Let’s Do Business Finance.
If security is an issue for the bank ask them to look at the Government Enterprise Finance Guarantee scheme, offering Government backing for loans to businesses where there is no or insufficient security.
But what if your bank says “NO” or you simply want to use an alternative?
Community Development Finance Institutions
Developed over the last decade CDFI’s are additional lenders to businesses with good propositions that cannot access the funding that they require from the normal High Street sources. Usually they are not for private profit organisations operating on a local or sub-regional basis and therefore very close to the businesses that they support.
Loan finance is available for most purposes over terms of up to 5 years. (Let’s Do Business Finance is the CDFI that covers the Sussex area)
Start Up Loan Company
This government programme offer loans at 6% to businesses that are less than 12 months old. This is a supported scheme offering help with writing the business plan and mentoring after the loan has been granted.
Peer 2 Peer Lending
Also known as Crowd Funding is definitely flavour of the month and now becoming accepted as a normal funding option. Government has recognized this by its new regulation of the industry and its own investment in the sector. The application process is not as easy as many would believe. An application is in effect vetted twice, firstly by the platform where it is rated and secondly by the investors. Remember if your pitch doesn’t raise the amount asked, it will not succeed and you will either have to start again or look for alternatives.