Where Should You Go To Obtain Finance For Your Business?
Whatever you’re doing, chances are you’ll have to raise the finance to pay for it if you don’t have enough money in the bank. Only trouble is; where do you go to borrow the money you need? In today’s blog post, I explore some of the most common finance routes for businesses.
Let’s say that you are on the verge of releasing a new product that will revolutionise your market! Sales figures are expected to be phenomenal! The only stumbling block is you don’t have the funds available to produce your new item and market it to your target audience.
Manufacturers, both here and abroad, will only create things if you agree to a MOQ or “minimum order quantity.” If you can’t afford to meet that MOQ, it’s likely the manufacturer will not entertain your order.
At that point, you are doubtless thinking that you are stuck between a rock and a hard place. But one way to raise the money you need is to get some investment finance. The way that it works is simple.
One or more investors will agree to give you the cash you need in exchange for a percentage share of your business. The deal might be to keep that share until the money gets repaid with interest. Or it could be a long-term shareholding.
Venture capital firms and investment “angels” are the places to approach for investment finance. That or the BBC’s Dragon’s Den programme on the TV!
Believe it or not, business advisors or “coaches” are an excellent route to getting the finance you need. They can scrutinise your reasons for wanting the money. And they can then advise what the best option for you is. Some might even invest in your business themselves. Companies like Lines Henry are useful, not just for their contacts, but also for their advice and help.
The next option, and one that growing numbers of businesses choose is to crowdfund the money you need. The concept involves “pitching” for the cash your business needs. In a nutshell, you describe why you want the money and how it can solve a particular problem.
In return, you could offer people that donate money to your cause a discount. Or some opportunity to use your new product before it goes on general release. Crowdfunding works well for “creative” ideas or ones that can improve people’s lives in some way.
Last but by no means least is invoice financing. OK, so you’ve already got some major retailers on board that are willing to buy vast quantities of your new product. They are willing to place the orders today, but you won’t get any money from them for at least two or three months!
To solve this cash flow dilemma, you could get invoice financing. A third-party company will pay you the amount that you’ve invoiced your clients. Meanwhile, they invoice your clients direct and chase them for non-payment, etc.
You can now fulfil your order obligations. And without panicking about how you’re going to raise the money needed to pay your suppliers upfront!