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Ways to Finance your Business

Lack of funding restricts a business start-up. Cash is the key to start any business and it is good to know what ways business can be financed.

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WAYS TO RAISE MONEY

1. Loans

2. Equity Investments

Common Money Sources to Start or Expand a Business

  1. Money from Your Personal Savings
  2. Friends, Relatives, and Business Acquaintances
  3. Creative Cost-Cutting
  4. Equity in Other Assets
  5. Supporters
  6. Banks
  7. Venture Capitalists

ADDITIONAL MONEY SOURCES FOR AN EXISTING BUSINESS

  1. Trade Credit
  2. Commercial Banks
  3. Equipment Leasing Companies
  4. Accounts Receivable Factoring Companies
  5. Venture Capitalists
  6. Money Brokers and Finders

There are four main sources of Finance.

1. Debt

Debt is a loan. This is considered a relatively Cheaper Source of Finance. As a start-up or growing business, you can go to the bank and get funding in the form of a loan or overdraft facility in exchange for interest payments and monthly installments payable over an agreed period of time

Important

Banks want to see if your business has the capability, capacity, and potential to be able to repay the money borrowed and the business should be able to pay the installments when falling due.

There are four main stream banks in Ireland.

ALLIED IRISH BANKS – AIB
BANK OF IRELAND
ULSTER BANK
PERMANENT TSB

Issue with Banks

  • Higher risk
  • Competition with Banks
  • Banks only gain from repayment
  • Monitoring & Assessment Costs

How the Entrepreneur is Assessed

• CHARACTER – HONEST RELIABLE
• CAPACITY – TO REPAY LOAN
• COLLATERAL – SECURING OF LOAN
• CONDITIONS – STRATEGY FOR DEALING WITH CHANGES IN PESTEL
• CAPITAL – EVIDENCE OF ENTREPRENEURS PERSONAL RISK

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Who could be equity partners?

  • CEB’s,
  • Enterprise Ireland,
  • Venture Capitalists
  • Angels

Investors could set as preferential Shares or Seed Capital

There could be tax advantages if the BES scheme or other schemes depending on the applicability and utilization.

Equity can be used to leverage bank borrowings

2. Equity

Money can be raised from a private investor, family friends, or relatives, or a person of acquittance.

The benefit of raising equity is that it has no obligation to repay funds however, Equity financing is expensive to Entrepreneur as the Return percentage could be high for the company.

It depends on your investor it could be a benefit or can be a distraction.

3. Government Grant

A business can generate cash by availing government schemes.

4. Business Generated Cash

A business can generate cash by availing of government schemes.

Other Methods of Rising Funds:

1) Invoice Discounting

2) Visa Business Cards

3) Asset Finance

4) Leasing

5) Hire Purchase

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