Jul 30
Raising Finance Small Business
Posted by: Paul Stanford
Raising Finance
There comes a point in most businesses where the need arises to raise some funding. Whether that be to start a brand new venture, buy new equipment or purchase another company the chances are that it will be stressful and if you get it wrong then you will be paying for it dearly over many years and worse still may lose your home and your marriage!
So what is the best way to raise finance? Well that depends on your circumstances and what you want to raise the finance for. With today’s economic climate you won’t be surprised to hear that the banks don’t like taking on much risk. So you will likely be asked to put up some form of personal guarantee or PG for short. Well this is OK isn’t it? After all your business idea isn’t going to fail and you have a limited company so what’s the risk with a PG? Well whilst your business idea may be brilliant there may also be factors outside of your control that prevent it from being the success that you had hoped for. Plus although you may have the protection of a limited liability company, you have given the bank a PG which effectively by-passes the limited liability of the company. In other words if you can’t pay then the bank will come to you for payment. That will normally mean a claim on your home. Your wife will likely not be best pleased to learn that her beloved home is having to be sold to pay the PG. All doom and gloom you might say. Well there is a glimmer of hope. There is something called the Small Firms Loan Guarantee Scheme or SFLG(S) for short! Essentially 75% of the risk is underwritten by the Government so you only have to find security for the remaining 25%. Meaning that if you borrowed £100k and things didn’t go to plan then you are only personally liable for £25k. The SFLG is administered by most major banks but I prefer to use a specialist provider such as Envestors www.envestors.co.uk as, apart from other benefits, they have the contacts and it’s the same old story of not what you know but who you know. In addition they will also explore other avenues of funding for you ranging from simple loans to private equity investment. As always terms and conditions apply but it’s worth giving it a try and if you don’t ask then you definitely won’t get!
Paul Stanford is a Director of 4Momentum http://www.4momentum.co.uk. 4Momentum provides business advisory services to small businesses, charities and social enterprises primarily in Sussex. Services include advice on starting a business, growing and transforming a business and selling a business. Clients typically contract 4Momentum for short periods of an hour to long term consultancy over many months for advice on subjects such as mentoring, business planning, sales and marketing advice, bidding for contracts, raising finance and general business advice. Paul is approved by the UK Government to deliver business advice on their behalf through Business Link and is a member of the Institute of Business Consultants. Visit his blog at http://www.paulstanford.co.uk/blog
Copyright 2008 Paul Stanford
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