Guide to funding: Overlooked alternatives

When businesses require funds there are a number of key matters that should be considered before any decisions are made.

Tim Mills PMMBy Tim Mills, corporate finance partner, PM+M.

Firstly, what is the intended use for the additional funds? It could be asset purchase, working capital requirements, acquisitions or even to pay out a retiring shareholder or partner.

Secondly, what is the quantum of the funding requirement and over what timescale are the funds required? It is also vital that consideration is given to the repayment terms of any borrowings and the ability of the business to meet those terms.

Where a business is considering additional debt, there are several options. In addition to traditional bank borrowings, business can raise funds through asset based lending, crowd funding and peer to peer funding. The choice should be based upon the specific facets of each individual case. It is essential that available alternatives are explored and fully understood before committing.

Where investment is required, private equity has grown in popularity and has become more widely available, featuring in many acquisitions and management buy outs. Choosing the most appropriate private equity provider is key to a successful investment partnership.

Two funding options that are often overlooked are grants and Research and Development Tax Credits.  Taking advice from grant advisers is highly recommended as they know the current grant schemes that are available and have the expertise to complete applications.

R+D tax credits are available to many businesses, who might not consider themselves traditional researchers and developers. They can provide a significant tax saving to a business which in turn releases funds to use for alternative purposes. Ensuring the necessary information is collated and submitted in an acceptable format to HMRC is very important and may require the assistance of a specialist adviser. The choice of funding may be confusing for many business owners and discussing the alternatives with experts is undoubtedly time and money well spent.