Better Business Finance: Alternative sources of finance for entrepreneurs

There are a wide range of financial products now available to help businesses access the investment needed to grow and thrive. This factsheet explains the benefits of some of the most popular sources of finance including

1. Asset finance

2. European Investment Bank (EIB) funding

3. Enterprise Finance Guarantee (EFG) funding

4. Export Enterprise Finance Guarantee Scheme (ExEFG)

5. Supplier payments

6. Trade finance

7. Invoice finance

8. Business angels

9. The Prince’s Charities

10. Community Development Finance Association (CDFA)

ASSET FINANCE

What is it?

Asset finance is an alternative funding solution to support the acquisition of new or additional assets. Outright purchases can be a significant drain on working capital and not always the most efficient way to manage capital expenditure.

There are a range of asset finance options open to customers and these can be summarized as follows:

Hire Purchase – the payment of a fixed amount across a specific period to cover the cost of the asset.

Operating Lease – Allows you to lease your asset from a provider over an agreed period. Typically, there is a built in residual value for the asset, which reduces the monthly payments, thereby bringing further cash flow benefits to the customer.

Finance Lease – Allows you to lease the asset from a provider over an agreed period. Repayments are spread over the economic life of the asset and can typically be tailored to customer requirements.

Contract Hire – covers vehicle fleet management, repair, maintenance and productivity.

What are the benefits?

·         Can often expedite access to modern technology and the resulting financial benefits that can bring.

·          Improved cashflow for the customer

·         Can often be a tax efficient depending on the tax allowances available

Where can I find out more?

Further details can be provided by your local corporate bank or through the Finance &

Leasing Association:

Telephone: 020 7836 6511

Email: info@fla.org.uk

Website: www.fla.org.uk

EUROPEAN INVESTMENT BANK (EIB) FUNDING

What is it?

The EIB is strengthening its support for Europe’s small and medium‐sized enterprises by providing this sector with access to finance through new and lower cost lines of credit.

This finance is typically available through the Banking sector and is aimed specifically at UK businesses across a range of sectors. The loan term is for a minimum of 2 years and is subject to a maximum single loan value of £12.5m.

In terms of other qualifying criteria, the loans are targeted at businesses with less than 250 employees. The loan must also be investment related and cannot be used for working capital or debt refinancing purposes.

What are the benefits?

·         Eligibility is very simple to establish

·          Financing rates are typically discounted under the EIB scheme, leading to reducing Costs.

Where can I find out more?

Further details can found on the EIB website (www.eib.org) or by contacting your corporate bank.

ENTERPRISE FINANCE GUARANTEE (EFG)

What is it?

A government led initiative to support small and medium sized businesses that have viable business plans, but lack the level of security normally required for a standard credit facility.

An EFG loan provides a 75% Government‐backed guarantee on any individual loan. The loan terms range from 3 months up to 10 years and have a maximum value of £1m.

An EFG loan is available to most types of business with a turnover below £25m per year. It does not support export transactions, which are covered by the EXEFG scheme. The scheme can be used to obtain a new loan or to refinance existing loans.

The EFG scheme can be used to cover some trade facilities such as letters of credit, but precludes direct support for export contracts.

What are the benefits?

·         Eligibility is very simple to establish

·         Provides an alternative source of funding for businesses without the necessary security for a commercial loan.

·         Secured and unsecured loans are available.

Where can I find out more?

Details about the scheme and the application progress can be found on the Department for Business’ website (http://www.bis.gov.uk/policies/enterprise‐and‐business‐support/accessto‐ finance/enterprise‐finance‐guarantee/efg‐application‐process) or by contacting your local corporate bank.