Is raising finance a good idea?
Many businesses are often trepidatious when considering finance options. It can feel like a stab in the dark, trying to gauge interest from the right parties and ensure that finance sources fall in line with your business aims. Raising finance when a company is growing rapidly is incredibly common, and it helps to have experts at hand to advise on the best approach.
When would a business be raising finance?
Typical scenarios for UK businesses looking to raise finance would include:
- Increasing cash flow
- Asset purchase
- Restructuring debts
- Change in operations
If you feel as though your company needs advice across the board, visit our Business Advisory page for more information on how Hillcrest Finance can help you.
Understanding risks from raising finance
Most creditors will not provide a business with funding unless they know it is a suitable arrangement for both parties. Investors may ask for specific information on what returns they could expect to see, or where your business feels it will get to from their investment.
We can advise on how to best present key information for any business finance plan, and hopefully help place you in a position to show that risk is minimal.
Understanding the sources of business finance
How a business secures finance will depend on the source most likely to help aims. Some of the common business finance options available include:
- Asset-based lending (ABL)
- Mezzanine Debt
- Bank loans
- Bridging loans
- Invoice financing
- Peer to peer lending
The type of funding a business opts for will vary wildly based on business aims. For example, a large business looking to raise finance via Mezzanine Debt will typically do so as they can afford to use stocks. Compare that to something like Bootstrapping, which much smaller companies would use to raise finances at the start-up level.
What recommendations would Hillcrest provide for raising finance?
It is important to have a business finance advisor at hand who will understand where your company currently sits and what options are out there. No two companies raise finance in the same way.
Our advisors will look at the types of business finance which are common in your industry, which type of equity funding will work in your favour, and help build the plans which companies will want to see before making commitments.
Will raising finance create more risk than reward?
It will depend on how finance is secured and how a company uses it. For example, banks are typically the first port of call for raising finance as they’re more likely to provide a loan. Simple steps like this still need reviewing to ensure that interest on a loan is fair, and the company knows what right to repayment a bank has, as it can affect assets and operations if things go wrong.