3 Ways to Get a Cash Injection into your Business

Ways to Get a Cash Injection into your Business
Read Time:3 Minute, 11 Second

Finding your business under financial stress? It happens to the best of companies in the best of times, which is far from where many UK businesses are today in the midst of a cost-of-living crisis.  

If you need to raise cash in a flash for your business there are ways to do it. Some are more effective than others.  

Business loans 

Business loans are not simple to get your hands on, and they carry risk. For small independent businesses, expect lenders to want your personal assurances. This can be obtaining a loan on the grounds that is secured against something you own personally, such as your home, or vehicle.  

For businesses with valuable assets, those can be used as security. As an example, a restaurant is likely to have invested several thousands of pounds in commercial kitchen equipment.  

These are accounted for as business assets using depreciation. In the first year, the equipment is worth the highest. As the years’ pass, the value depreciates. By using depreciation for valuable assets owned by your business, lenders are better able to understand the value of the equipment you are offering as security.  

Without accounting for assets properly, it could lead to a situation where expensive equipment necessary for the business can’t be afforded from available funds, therefore, limiting your options to expensive leases for business-critical assets.  

For start-up loans, the British Business Bank provides up to £25,000 at a capped 6% interest rate repayable over 12 to 60 months and is government-backed. It is worth considering the finance you will need to grow before you start a business. Having capital to operate reduces friction in the early years.  

Peer-to-peer (P2P) lenders 

P2P marketplaces match investors to borrowers for short-term loans. Peer-to-peer lending is regulated in the UK. It is an alternative method to mainstream lenders, but there is a wider pool of investors and some who may be more willing to take on higher risk investments, for a higher interest rate. 

Lenders are interested in growing their savings based on the returns borrowers pay. There is a wide range of P2P platforms, each catering to different risk levels and different loan types, such as bridging finance aimed at meeting payment deadlines to avoid defaulting on amounts owed to creditors or suppliers.   

Get investors  

Your company formation matters a lot when it is more than yourself involved. It affects how ownership and shares are divvied between founders, co-founders, or shareholders.  

In a partnership, for example, the split would be 50:50 and ownership shared between two parties. In a limited company, one person is the Director with others registered with financial interests in the company. Shareholders are paid dividends based on the company’s performance.  

There are legal aspects to consider about risk, ownership, and future concerns, such as if a partnership is solely for financing, in which case, a limited company could be formed, a percentage of shares set as equity for an investor, which can be scaled back or up in the future to accommodate growth.  

When raising finance by bringing in investors, it is important to get financial advice from an accountant, because once shares are set, there is little recourse. In the initial stage of funding, it is wise to err on the side of caution and retain as much ownership as possible because, after five years, new investment could be needed.  

If you give away too much share equity too early, there will be little left to bargain with in the future. When attracting investors, the aim is not only to raise cash but also to bring in expertise to help the business grow. Otherwise, it is just a short-term cash boost with long-term ramifications for the business and its owner.   

Happy
Happy
0 %
Sad
Sad
0 %
Excited
Excited
0 %
Sleepy
Sleepy
0 %
Angry
Angry
0 %
Surprise
Surprise
0 %
a partnership ecosystem Previous post Benefit from Local Business Alliances
Tradeshows Next post Advantages of Shared Workspaces for UK Startups 

Average Rating

5 Star
0%
4 Star
0%
3 Star
0%
2 Star
0%
1 Star
0%

Leave a Reply

Your email address will not be published. Required fields are marked *

Close