Access to finance
16 November 2009by Ina Dimireva -- last modified 17 November 2009
There are various sources of funding, support and advice available for business owners from a variety of UK bodies.
The UK Government has put together a package of help and guidance for businesses struggling through the current economic downturn, called "Real Help for Business Now".
Grants: the basics - Business Link
Public finance
Indirect support
As an SME, you may have viable business plans that need funding and for which a loan would be appropriate. However, you may be struggling to access the finance or working capital required because of the additional risks arising from the economic downturn.
The Enterprise Finance Guarantee helps to overcome this by providing lenders with a Government guarantee for 75 per cent of lenders' exposure on individual loans. The Guarantee is part of the Government's Solutions for Business portfolio and is available to businesses throughout the UK through approved lenders.
Participating lenders administer the eligibility criteria and make all commercial decisions regarding borrowing. The decision whether or not to use the Enterprise Finance Guarantee with any loan rests with the lender and follows their commercial assessment of the proposition.
Solutions for Business portfolio
Enterprise Capital Funds have been established to address a market weakness in the provision of equity finance to SMEs. Government funding is used alongside private sector funds to establish funds that operate within the 'equity gap'; targeting investments of up to £2m that have the potential to provide a good commercial return.
Direct support
The Grant for Research and Development is a business product which provides grants to help individuals and small and medium-sized businesses (SMEs) based in England and involved in researching and developing technologically innovative products and processes. Scotland, Wales and Northern Ireland run their own equivalent schemes.
Grant for Research and Development
Early Growth Funds were developed to encourage risk funding of £50,000 on average for start-ups and growth firms. Most funds require equivalent contributions from private sector investment and operate at regional and national level.
Regional Venture Capital Funds (RVCFs) is an England-wide programme providing risk capital finance of up to £500,000 to SMEs demonstrating growth potential. Each Regional Development Agency (RDA) has sponsored a fund manager to set up and run a fund in their region.
Regional Venture Capital Funds
Community Investment Tax Relief (CITR) aims to stimulate private investment in disadvantaged communities by providing a tax incentive to individuals and companies that invest in not-for-profit and profit-seeking enterprises in or serving those communities.
The tax incentive is targeted at investors in accredited intermediary organisations, which then invest (directly or indirectly) in enterprises in or serving disadvantaged communities. The CITR scheme aims to encourage the growth of these intermediary organisations, termed Community Development Finance Institutions (CDFIs), which specialise in providing funding to businesses as well as social and community enterprises within under-invested areas.
Community Investment Tax Relief - HMRC
HM Revenue and Customs CITR Manual - HMRC
The Business Link site and affiliated sites in Scotland, Wales and Northern Ireland are key starting points when looking for finance. Business Link's finance assessment service offers a personalised list of suitable finance options for businesses, as well as an assessment of a business's readiness to look for such finance.
Finance and grants - Business Link - UK
Flexible Support for Business - Wales
Highlands and Islands Enterprise - Scotland
Business Link finance assessment
The Grants and Support Directory provides access to nationally and locally available schemes from central and local government and private organisations. It also offers help with starting up or developing businesses.
Grants and Support Directory - Business Link
Access to EU funding
The Business Link website covers access to EU funding.
Private finance
An integral component of starting a successful business is raising sufficient capital. In the private sector, there are numerous resources available:
- personal savings or borrowings - especially if it is difficult to attract outside investment
- if there is a strong business plan in place, then borrowing from a bank is possible. Businesses often use overdrafts for day-to-day borrowing and loans
- a larger business with good prospects might attract outside investors, such as "business angels ", who invest in exchange for a share in the business
Securing funding and business plans - the Dragons' Perspective
The National Association of Commercial Finance Brokers (NACFB) helps businesses find financial brokers through postcode matching.
National Association of Commercial Finance Brokers
Other specialist lenders include:
- Prime, for people over 50 setting up businesses
- the Prince's Trust, for young people setting up in business
- Co-operative & Community Finance, aimed at co-operatives, employee-owned businesses and social enterprises
Prince's Trust - Business Programme
Co-operative & Community Finance
Before arranging finance through a lender, a business should run a check on a potential lender's credentials at the Financial Services Authority.
Businesses should also assess whether or not a prospective lender complies with the Business Banking Code of the Banking Code Standards Board.
Business Angels are private investors who invest in SMEs with high growth prospects. They often bring considerable business experience along with their funding.
British Business Angels Association
Raising venture capital involves selling a stake in your business to an investor in return for capital. They are less likely to invest in a business if the business is looking to borrow under £100,000. You can find an excellent introduction to private equity on the British Private Equity and Venture Capital Association (BVCA) website.
British Private Equity and Venture Capital Association
Commercial mortgages can be used for purchasing business premises, expansion, commercial investment or property development. Mortgages are usually for 15 years or more. Most banks and building societies offer commercial mortgages and expect business owners to invest some of their own money in the purchase.
Commercial mortgages - Decision Finance
Simply Business Finance is a finance and insurance broker specialising in owner-managed businesses. It arranges the following types of loans for business: invoice finance, balance sheet funding (asset-based lending), asset finance, commercial mortgage, trade loans and personal loans.
Business support organisations can advise businesses on how to find financing.
Business support — United Kingdom
Source: European Commission
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