Other sources of finance

Other sources of finance
all owner-managers at various stages throughout the development of the business. Rarely does an enterprise sustain enough profit to enable it to expand to its full potential without additional funding.

There are a number of sources of finance and you will need to plan your choices carefully to ensure that you get the most cost-effective, relevant and convenient form of finance for your business at any particular point in time.

The Overdraft
Traditional bank finance in the form of an overdraft continues to remain an important source of external finance, particularly for smaller businesses. Overdrafts are simple and effective. However, because they can be withdrawn by the bank at any time and have to be renegotiated normally on a yearly basis, they do not necessarily provide a good long-term solution.

Term Loans
Term loans offer greater security than an overdraft. Unless the terms of the covenant are term loans breached are assured for a full term, and increasingly seem to be gaining popularity at the expense of the overdraft.

Equity Finance
Equity finance, whether stock market or venture capital can offer companies a far more substantial financial foundation than can ever be achieved by relying solely on debt. Another area of equity that cannot be overlooked is that provided by business angels -- wealthy individuals willing to provide a company with capital in exchange for a proportion of its shares.

Parting with some of the shareholding value you have spent years creating can be a daunting task and it is essential that the process is handled carefully to ensure that you get the best deal for you and your business. Many business owners avoid this route as they fear losing control of the business, this is not necessarily a problem but professional advice should be sought so that owners know exactly what they are getting into.

Whatever your rationale for choosing to raise equity finance it is critical your have a clear strategy to take your business forward. Undertake a detailed analysis of your personal aspirations and those of the business. Examine your business, your market, your management strengths -- and weaknesses -- and put together a detailed business plan explaining what you are going to achieve and how you are going to get there. The more an equity investor believes in your opportunity, the better the deal for you. Consider who you want as shareholders and be alert to any potential conflict between family and non-family shareholders.

It is essential that the financial structures of a business are appropriate for both the company's and the owner-manager's needs. Grant Thornton can help you throughout the funding process, creating a package, sorting out the key issues a financier would want to raise and recommending the best source for the job in hand.