Sources of finance

As Accountants North London we are always looking for what makes businesses survive and thrive.

According to a recent report “Success in challenging times”…successful businesses are likely to have more than one source of funding. This post explores the various sources of finance available to a start-up.

Interestingly, according to the report only 29% of business funding now comes from banks. The attitude towards banks by business owners ranges from disappointment to contempt.

Small businesses with relatively few employees are now likely to use Credit Cards and personal/family savings. According to the report, savings account for 39% of business funding.

Remortgaging personal property is another option along with other traditional sources including:

•  Business Angels
• Venture Capital finance
• Grant
• Leasing
• Factoring
• Invoice Discounting

However, recently other forms of funding are being considered including crowdfunding and pension funding.

Crowdfunding is where a group of people invest in your business via a Website. An example is www.KickStarter.com

Pension funding involves creating your own pension scheme so you have control over your pension fund. An entrepreneur who was turned down by the Dragon’s Den used his pension fund to get £30,000 into his company. He is now looking at £250,000 of sales of his heated Rugby Gloves.

Different business should consider different types of funding. For example, a restaurant could consider investment of £5,000 20 friends and family. Not only does this give the business £100,000 there are 20 highly motivated people who are keen that their friends, family and businesses use the restaurant.

Many Golf Courses are funded this way by offering Debentures. This gives the owner the right to play the golf course for life with paying fees.