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Various sources of finance Essay

In addition to bank loans there is a range of alternative sources of finance available. At same time, a loan from a bank might not be the best way forward for every business.


1. Own finance – one can choose to start his own business by using his own financial resources. This may be from savings accounts or other investments that he has. Typically, it is not advised that one should fund his start-up from personal overdrafts, loans or credit cards as these are not necessarily tailored to your business needs or requirements.

2. Family and friends – You may have family and friends who wish to invest in your business. This is often convenient and may allow you to get finance on favorable terms. However, make sure you have a formal agreement of loan terms in place so you or your family and friends are not left unprotected in the event that you are unable to repay the loan.

3. Banks: The most common forms of finance used by start-ups are:

•Business overdrafts – Banks offer overdrafts as a form of short-term finance. These are available to companies that have business current accounts. They are a good way of covering any fluctuations of money coming in and going out of your business. •Term loans – Loans are designed to help you buy equipment and supplies for your business. They are best if you need to buy fixed assets, such as machinery or office equipment, where the amount you need is not going to change.

4. Grants – These are a good option for businesses looking for financial assistance for specific projects. mostly, funding comes from EC and UK government sources, including local authorities, charitable trusts,( e.g. prince Charles trust funds) and corporate sponsors. Further on www.grantnet.com

5. Loans – It is not just banks that can provide a loan. Business support organizations such as enterprise and development agencies can help
businesses looking for loans. The National Enterprise Network is a good example: http://www.nationalenterprisenetwork.org/

6. Business Angels – Often high net worth individuals, Business Angels invest in high growth businesses on their own or as part of a syndicate. In addition to providing finance, Business Angels often make available to companies their own skills, experience and contacts. If you are interested in finding out if a Business Angel is right for you, visit: http:// www.businessangel.org

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