Finance Your Growth

Funding growth strategies can become a complicated, due to the number of potential options. Critical decisions are: do you believe in your business model enough to stomach high risk? Are you prepared to sacrifice equity in your business?

Debt or equity is an old dilemma. Invariably, equity is less risky and provides access to a larger cash pool however debt allows you to retain control of your business. Venture capitalists will want to do as much as possible to guarantee their investment, often resulting in increased reporting, provision of board seats and potential sliding scale equity stakes.

Assuming debt is your preferred option, what mechanisms of lending and security are available to you?

Factoring - While factoring does not provide seed capital for a venture, it can accelerate cash flows through the business by providing funding against raised invoices meaning you will not need to fund the unpaid invoices on your balance sheet. Compare factoring quotes.
Asset Finance - Asset finance can be used to buy the equipment needed to start your business if you are a start-up as long as you can pay a deposit and the underlying value of the asset ensures the lender can make their money back if the venture fails. Compare asset finance quotes.
Commercial Mortgages - If you are considering buying a new business where property is a key aspect of the going concern (such as a care home or hotel) or you are moving to new premises then a commercial mortgage can help fund the purchase. Compare commercial mortgage quotes.

Unsecured Lending

Forms of unsecured lending such as business overdrafts and business loans are usually not available to start-up and young businesses however they will become more viable options as your business grows:

Business Loans - Loans for your business can be taken out in much the same way as a personal loan. Loan lenders will look for strong proof that your business is stable and profit making if the loan is not secured which can be hard for younger businesses. Compare business loan quotes.
Asset Based Lending - Also known as balance sheet lending, this is concept of lending originating in North America where many non-banks entered the medium to large side of private company financing. In essence an ABL lender will take a view of every asset recognised on your balance sheet and lend on a loan to vale and pricing basis depending upon that asset and its security. Usually present in every ABL transaction is invoice discounting due to the secure nature of the debt and its relative ease of collection should anything go wrong. Other assets which may be considered include: property, plant & machinery and stock. Compare asset finance quotes.
Leveraged Buyouts - Leverage buyouts are similar in nature to asset based lending however the cash that is raised is usually pulled from the assets on both parties in the transaction: the acquirer and the acquired. This type of transaction lends itself to a syndication deal i.e. several lenders will be involved in providing the cash and a cash flow loan may be provided on top of the secured assets. In this way the acquiring company can raise cash in excess of the paper value of the target so buying out the present equity holders.
MBO or MBI - Similar securing strategies are used during a Management Buy Out (MBO) or Management Buy In (MBI) however as the acquiring party is not another business the debt levels of the company are usually greatly increased.