Sourcing finance... affordably

European Currency

There’s no doubt that business finance has become increasingly more difficult to source in recent years so we asked business finance specialist Steve Walker for his guide to unlocking investment.

Finance options:

1. Bank
Bank finance is still likely to be the first call, and for many it’s the right place to start because your bank should have valuable insight into your business and it’s potential. But don’t give up if the bank says no, there are lots of alternatives out there.

2. Special asset finance
Specialist asset finance providers lend money to buy equipment.

3. Alternative business funders
In the past 5 to 10 years we’ve seen the emergence of alternative business funders. They’ll require up-to-date business accounts and preferably some form of business plan, and they’ll make their decision based on track record, the financial strength of the business and on the residual value of the asset you’re looking to buy.

Ask your supplier to provide the data you need to make a robust case for investment. They should be able to work out the return on investment for every system they specify, which takes into account labour savings, materials costs, maintenance and even the improvements in brand value.

4. Peer-to-peer lending
The market place has reorganised and some novel funding sources have come to the fore. Peer-to-peer lending, for example, is an innovation of the last decade. Money is provided by individuals who invest in a business by way of a loan. It can be a very affordable way to attract investment as it works upon a reverse eBay principal - the more bids that are made, the lower the interest rate that’s available.

5. Community Development Finance Institutions (CDFI)
CDFI are social enterprises that invest in businesses and communities.

6. Local and national grant schemes
Always remember to check out the options for funding asset purchase through local or national grant schemes too. Often these require you to demonstrate job creation or preservation, supply chain security or commitments to training and education and that ROI data which suppliers can provide will also be key.

In these post-credit crunch times it’s more common to see a blend of different sources of finance used to fulfill a business’ need. It’s not unusual to see small businesses rely on a mix of personal finance, small bank loans and alternative source of finance like peer-to-peer lending or CDFIs operating in their local area. Caution is advised though, especially when considering financing a business with personal credit.

It sounds obvious, but before rushing into a decision, do your research and find an option that works best for your business. And remember, you’ll have the best chance of obtaining any sort of finance if you give all the information required upfront. All too often businesses withhold information, hindering the process. Be prepared and be clear just how the investment will improve your business – if you’re confident then there’s every chance you’ll be able to convince the funder to share in your belief.

With all sources of finance, comprehensive return on investment calculations are required to show potential lenders the value of the investment and demonstrate how a loan could be repaid using the savings that would be achieved. That’s why at Automated Packaging Systems we compile this data for all our customers and include an analysis of the current situation, material and labour costs, ROI calculation, and payback period estimation.

Please call us on 01684 891 400 to discuss your specific application.


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