Your options for raising funds

So you’ve got a great idea that you’re convinced will sell and you want to set up your own business. Alternatively you may have an existing business that you have ambition to grow.

In both of the above scenarios one of the resources you may well require is cash. If you have personal savings or cash reserves in the business that you wish to reinvest then fantastic. If not then what should your next step be?

I always think it is worthwhile talking to your bank. There is still a feeling out there that the banks don’t lend money anymore to businesses. I know most of the banks in and around York and they are definitely lending money albeit it’s worth adding that it’s not always straightforward to come by and anything with too much risk attached to it is going to be a challenge, but then what is too much risk?

Let’s take the options for someone looking to start up a business first. These are the hardest businesses for a bank to lend to because you don’t have the one thing they want and that is a track record. So the question is where can you turn to next? There are many alternative lenders in the market place nowadays offering a plethora of products and services. It can seem like a minefield to the untrained eye knowing where to start and what to look for.

The Start Up Loan Scheme offers loans up to £25,000 at a rate of interest of 6% with no set up fee. This is a Government scheme that is delivered in North Yorkshire by the Business Enterprise Fund (BEF). Customers don’t need to have a deposit but will need to put together an application form that includes a business plan and personal credit report amongst other things. If the idea of writing a business plan scares you to death then don’t worry, BEF have a template split into a number of topics to help you.

Other funding options such as crowdfunding are worth investigating depending on the type of product or service you are looking to provide as it fits some sectors better than others. Have a look at kickstarter as an example. Here you can post your proposal online along with a target that you want to raise. Private individuals can contribute to your pot from as little as £5 if it is something they want to see succeed. They don’t get a stake in your business but in return for their pledge you have to give them something in return and this is usually some discounted products once they are available.

For existing businesses the need to raise funds can cover many reasons, for example, wanting to buy some new equipment, new premises, recruit more staff, buy another business or provide a cashflow injection if you’ve had a bad debtor. This is by no means an exhaustive list. If your business has a good track record with the bank then they are a good place to start. Go and see them with your proposals and see if they can help. They may well want some security such as a charge over your assets depending how much you need to borrow but it is well worth exploring as they have many different products to fit your needs such as loans, overdrafts or invoice discounting.

If your track record isn’t spotless and you’ve missed some previous loan repayments or gone over your overdraft limit a few times then the bank may not be in a position to help. Again BEF can help businesses with loans between £500 — £150,000 available. BEF are a local business, based in Bradford but with local offices in York, Leeds and Darlington where everything is done face to face so if you have had problems in the past you can meet with their staff and explain the history to them. Loans can be provided for most reasons as long as they are going to be used in the business and any type of business can apply, be it a sole trader, partnership or limited company. As with the Start Up Loans, customers don’t need to have a deposit so 100% of the proposal can be financed.

BEF are a not for profit organisation and a social enterprise so are not driven by generating returns for shareholders. Our proposition is based around helping local businesses to access finance when they need it most.

There are numerous other sources of help. City of York Council publish an access to finance newsletter that lists a number of different providers. Their website is www.yorkmeansbusiness.co.uk

Simon Middleton will be at two of our Popup’s. Come and speak to him in Goole on 4th June and in Malton on 3rd July.

Contact Details: Simon Middleton, Business Enterprise Fund, Blake House, 18 Blake Street, York, YO1 8QH. 07827 318690.