Business finance is the money any business needs in order to run its operations.
Not only is finance required the moment you start up a company, but also throughout various stages of its development and growth – ensuring that there is enough money to pay your staff and for the supplies materials and equipment needed to produce the goods and services you sell.
Additional finance may also be required – often at short notice – to meet new business opportunities which might suddenly emerge and call for you to launch marketing campaigns to support a new venture, re-stock and re-equip, perhaps set up a new office in another town, or make sure your day to day cashflow is suitably balanced.
Where it comes from
So, where does that much-needed business finance come from?
In the very early days of company formation and start-up, sufficient finance might be found from your own personal resources or those of family and friends.
As the business grows and the demands for finance become more pressing, however, personal sources are likely to be exhausted and you must look elsewhere. That search may take you in one of two directions:
- if there is still some apparent risk in the longer-term success of your business, you might want to consider equity investment – investment made in return for a share in the ownership and decision-making of your business;
- sources of equity finance range from private investors, business angels and venture capital – but all involve your sharing ownership in your business and, with it perhaps, some loss of independence in the way that it is run;
- for that reason, many businesses prefer debt finance – borrowing the necessary funds and repaying the loan over an agreed period of time;
- if an especially large sum needs to be borrowed – by way of a mortgage, for the purchase of new or additional premises, for example – the loan may need to be secured against company assets and the repayment term spread over several tens of years;
- secured debt finance over a substantial term, of course, attracts a considerable amount in interest – and if the rate is variable, it may become more difficult to manage and budget for the regular repayment instalments;
- in many instances, rather less needs to be borrowed – in the range of, say, £15,000 to £100,000 – and repayments may be scheduled over the relatively short-term of between three and 12 months, so attracting a far less amount of interest;
- business finance on these terms is typically unsecured – so none of your company’s assets are at risk – and the rate of interest is usually fixed throughout the borrowing term;
- a fixed rate of interest ensures that the monthly repayments are equal and entirely predictable, allowing you to make the necessary budgetary arrangements for your expenditure with ease;
- thanks to the online systems developed by some such lenders, short-term, fixed-rate, unsecured loans may be arranged in a matter of days, with a decision in principle given by some lenders in a matter of minutes and, subject to the approval of your formal application, the requested funds transferred directly to your company bank account within just 48 hours or so.
Business finance options, therefore, are many and varied, in the form of both equity and debt finance. Depending on the amount you want to borrow and the timescale within which you want to repay it, short-term business finance in the form of a business loan may prove the way forward.