Types of Finance

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Before making a decision on the type of finance you are looking at for your business, you will first need to consider the following factors:

  • What is the current situation for my business?
  • Where would I like to see my business in 3-5 year’s time?
  • How much money do I need to invest to achieve my business objectives?

By taking the time to assess where your business is currently at and where you would like to be, you will gain a much clear picture of exactly how much financial support you will need to achieve those goals.

There are two different options for where your financial sources will be readily available from:

Internal finance

Sources inside of your organisation can range from cutting your costs and generating business savings by becoming more resource efficient to free up some extra cash for investment. Alternatively, you may be able to generate extra cash from high profit margins, which can be reinvested back into the business. Another option to consider when looking at internal funding options is to offer share options for the business. Internal finance is always a good place to start before you explore external options for extra funding, as it allows more flexibility with your money and also eliminates the extra costs for repayments on external funding.

 

External finance

There are a whole host of external funding options for business, from traditional methods such as bank loans, which can offer substantial sums of money for those bigger projects. You may also wish to look at grant funding, which can fund part or all of your investment plans, dependant on the criteria. For more information and options on grant funding, check out our Advice and Grants Scheme finder page.

Another more recently utilised source of external finance might be potentially looking at a crowdfunding campaign, which involves asking large numbers of people to invest a small amount of money each to contribute towards the total funding target for the project. This usually involves some form of return on investment for the contributors, either in the form of shares for the project or a percentage of profits relating to their contribution.

 

For further information on preparing your business for finance, visit our our page on the Funding section.

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