Start Up Finance - Does Anyone Do It?
Let's explore the options;
As a new business most entrepreneurs find financing the business one of the biggest challenges; many lenders need to see 18 months to 24 months accounts & trading before lending any money to the business, so is there any way to lend money to get those first orders rolling in? YES!
1. The first, quickest & cheapest is something called invoice finance - basically you sell an invoice ( or the whole debtor book if you want ) to a finance company, they will then give you a percentage of the value. Once your client pays the invoices, they will send you remaining funds less the interest.
2. Loans - we all know a traditional bank loan and this is no different; the bank will typically
advance the business money if its supported by the business owner - this means they will take into account any equity you have in your home via something called a personal guarantee, which is a legal document giving the lender the right to move the liability from the business to you in the event the business for some reason fails. Most lenders see this as a 'test of faith' to gauge your commitment to the business you are setting up, but we can insure this risk so that if the worst did happen an insurance product would pay out a set percentage of this charge so that it doesn't fall on you.
These options may seem daunting as it is venturing into an area that you have not explored previously. I would recommend that you seek independent advice from brokers who specialise in this area as they have access to many lenders and can steer you to the right product from the right lender best suited to your circumstances.
Francesca Rea