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What's new in the world of tax and business? Here we feature advice and information on the latest hot topics. To view our full archive of articles, please click here.

Securing funding for your business

The government have recently launched a new scheme to allow those small businesses who are unable to access finance to be matched with alternative finance options. Here we outline the key points of the new service, and we also suggest other types of funding to consider when searching for finance for your business.   

The new matchmaking service for small businesses

The government's new programme will require nine of the UK's largest banks to automatically pass on the details of small businesses they have rejected for finance to three finance platforms: Funding Xchange, Business Finance Compared and Funding Options.

These platforms will then share the details with alternative finance providers and help to 'facilitate a conversation' between the business and any provider who expresses an interest in them. RBS, Lloyds, HSBC, Barclays, Santander, Clydesdale and Yorkshire Bank, Bank of Ireland, Danske Bank and First Trust Bank are all required to offer access to these finance platforms - although small businesses must give permission before their details are shared.

Alternative sources of finance

Raising funds for a business remains a significant challenge for many. Whether you are looking to start a new business or require capital to expand, there are many factors to consider, in addition to whether you'd like to utilise the government's new funding initiative. You may want to consider some alternative ways of securing finance.

Make use of an overdraft

Overdrafts are credit facilities that have a set amount of money, agreed between you and your bank. Using an overdraft may provide a flexible means for covering short-term outgoings and any potential unforeseen or unexpected business expenses. Overdrafts, however, should not be used as a long-term source of finance, and continued use may prompt your bank to question whether you are in financial difficulty.

Apply for a grant or government support

A grant is typically supplied by the government, charities or local councils. For those that qualify, grants can be a useful source of inexpensive financing. Grants are typically non-repayable: however, strong competition for such a source of finance persists. Additionally, grants are usually only offered to specific sectors for specific projects that are in their proposal stages.

In some instances, you may be asked to cover part of the cost of your project or to match the funds awarded to you.  

The British Business Bank is a government owned company which aims to make finance markets work better for small businesses and works with over 80 partners such as banks, leasing companies and venture capital funds. Further information can be found here: http://british-business-bank.co.uk/

Sell business shares to an investor

Making use of this option involves selling part of your stake in the business to an investor. If you choose to sell to an investor, any profit (or loss) the business makes will be shared with them. However, by using this type of finance you will not need to make monthly repayments and you will not be charged interest.  

This source of finance only applies to limited companies, so sole traders and partnerships would have to make use of other funding options available to them.

Asset finance

Leasing equipment means you can avoid spending a large amount of money in one lump sum. This is often beneficial from a cash flow perspective, although it should be noted that in some cases the monthly leasing instalments can be more expensive than buying the asset outright. Leasing will also give you access to a high standard of equipment, and assets can be upgraded easily when contracts end.

Hire purchase agreements are another option for those who want to acquire business assets without having to pay for the whole item up-front, and contracts usually include an option to purchase at the end of an initial period.

And don't forget, the cost of qualifying business equipment is usually tax deductible - talk to us for further details.

It is worth considering a range of options when sourcing finance for your business. We can advise on the most suitable type of finance to suit your needs - please contact us for further information.


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