Raising Finance For Your Business

In 2023, the number of private sector businesses in the UK hit a staggering 5.56 million which is a huge rise compared to the 3.47 million businesses in 2000. The growth of businesses in the UK is not slowing down and if you are looking to start or grow your business, raising finance is a highly important aspect.

How To Raise Finance For Your Business 

If you’re currently in the process of raising finance for your business, whether you are an SME or a large business, there are a number of ways you can raise finance. It’s important to choose the right financing option for you and have a firm understanding of the method. Making the right choice can help to reduce financial risk and yield the best results for your business. 

Having a robust plan in place will allow you to identify the most appropriate way to raise finance for your business. At Tree Accountancy, we help our clients to prepare financial forecasts, choose the most suitable way to raise finance and assess any risks. 

In this article, we’ll talk you through three methods that you can use to raise finance for your business:

Bootstrapping 

Bootstrapping will likely be your first choice when starting a business, and this describes a situation when an entrepreneur starts a business without relying on outside investment and instead uses their own personal finances. Bootstrapping can be one of the most inexpensive ways for new businesses to raise finances and can help your business get off the ground. Bootstrapping methods can include: 

• Using personal assets such as cash resources and personal savings 
• Personal debt such as a credit card 
• Having a co-founder – if you are starting a business with someone else, it is likely a joint venture so both parties can contribute to raising finance for the business

Bank Loans 

A bank loan can be an extremely effective way of raising cash for working capital or investment. There are a range of different bank loans available to businesses depending on many different factors, these can include: 

• Unsecured business loans – this will allow your business to borrow money and there will be fixed repayments over a set amount of time that you will pay back with interest. The amount you can borrow will depend on your circumstances and it is likely that banks will carry out background checks to ensure you can afford to borrow and pay back the loan. 
• Secured business loans – a secured business loan allows you to use your company’s assets as security for your business loan, the assets can include your property, equipment or inventory and the amount you will be able to borrow will depend on the value of the asset that you put down. 

Unsecured and secured business loans are both effective ways to raise finance for your business, secured loans will usually offer a lower interest rate which can be extremely beneficial for businesses as it means you do not have to pay as much back, however unsecured loans allow you to borrow money for your business without being at risk of repossession of your assets. 

Invoice Financing 

Invoice financing can be an extremely effective way for B2B businesses to get access to money quickly. Invoice financing will use a business’ invoices as security for a loan. A business will effectively “buy” the company’s invoices and give you access to a percentage of that invoice’s value so that as a business, you do not have to wait for the invoice to be paid to get access to the money. There are two main types of invoice finance: 

• Invoice factoring – this allows your business to generate money against any unpaid invoices that you have outstanding. The finance provider will give you access to up to 90% of the value of your invoices, and they will then collect the payment directly from your customers. 
• Invoice discounting – this works in a very similar way to factoring, and the finance provider will give you a percentage of your invoices quickly, however your business will keep control of getting the payment from your customers 

What Our Experts At Tree Accountancy Say 

The type of finance you can access will depend on how long the company has been trading and what security you have. The level of repayments will influence the decision and with a bank base rate at the highest in years then that should also be considered. In our experience there is quick finance that is expensive and not always fit for purpose and the right finance that will allow you to scale.

If you have any questions, or require any further information, please email hello@treeaccountancy.co.uk and one of our financial experts will be happy to help. 

How Tree Accountancy Can Help 

At Tree Accountancy we work with clients to ensure the right type of finance is obtained with a plan of what this is to be invested in and then report on the results.

We have a corporate finance advice team that has a wealth of experience to provide businesses with the best possible financial advice. We can help all sized businesses with how they can raise finances and what would be the best way for their business in order to gain the best business growth. To find out more about the services we offer and how we can help your business when raising finances, please get in touch with us on 0161 220 2920.