Ways For Your Business To Raise Funds
Just as in personal finance, there are many ways to raise extra cash for your business. This might be for investment purposes to help grow your company, to cover losses caused by bad debt (all too common in recent years unfortunately), or maybe just to ease cash flow and give your business a financial buffer to work with.
Broadly, the same range of financial products available to personal borrowers is available to business borrowers (although with some extra specialist products which we'll cover below). These include credit cards, overdrafts, loans and mortgages. They all work in much the same way as their personal equivalents although there may be extra features helpful for running a business - for example, a business credit card will make it easier to have several cards issued on the same account, each with their own credit limit, with itemised statements so you can see at a glance how much each of your employees or departments is spending and on what.
Likewise, commercial mortgages are larger loans usually secured on property, although they tend to be more flexible than personal mortgages in what they'll accept as security - plant or other assets can often be used as collateral.
This is a way of funding expansion by buying new machinery or other assets. You could think of it as the business version of hire purchase - you pay a deposit for the assets you wish to acquire and the finance company pays the rest. The new assets act as security for the loan until, through monthly repayments, the initial amount borrowed plus interest is paid off. This is a good way of funding expansion without risking any of your existing business assets.
Invoice Finance / Factoring
Cash flow can be a problem for any business, large or small, especially when dealing with customers with long invoicing periods. Invoice finance is a way of dealing with this situation. Simply put, when you raise an invoice, the finance company pays a proportion of it straight away and then takes over responsibility for collecting the rest. After the full payment is received on the due date, the balance minus a fee is passed on to you. If you find you are spending more time chasing unpaid invoices and fretting about your bank balance than actually running your business, then this can be a very valuable service so long as you factor in the costs to your pricing and so on.
Disclaimer: Even more so than personal finance, commercial finance can be a minefield and before making any big decisions it's extremely advisable to consult a specialist for advice.
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