Financing Options

For businesses that are just starting out, banks usually do not offer unsecured business loans. This is because many new businesses do not last and the lenders cannot help but have fears of the business folding up. Amateur entrepreneurs can offer their home, or other properties as collateral to ensure that the lender will get their money back. Lenders will also ask for a guarantor who will answer to the debt if for any reason they are unable to pay for it. A debenture may also be offered, which is a long term unsecured debt instrument usually offered to limited companies with divided ownership.

Entrepreneurs who who do not wish to share ownership of the business they are starting with banks can seek the following financing options:

Business Angels
These are individuals who offer to make investments in businesses in terms of money, time, and management skills. Their involvement in the business is in exchange for a share in the profit and company ownership.
Chattel Mortgage
This is a secured loan presently available only to businesses located in Wales and England. The collateral required is the business' asset. It can be company vehicles, equipments in the office, or machines used in production.
Commercial Mortgage
This is another secured loan by which businesses or individuals purchase properties without giving the full amount of the property upfront.
Equipment Finance
This is offered for growing businesses which need additional capital to reach their maximum profitability. The collateral in equipment finance is the company's equipment which will be repossessed if the loan is not repaid within the loan term agreed on by both parties.
Factoring
This is ideal for new companies and allows businesses to borrow against their receivables.
Overdrafts
These are flexible and more suited for everyday business expenses.
Research and Development Grants
These are offered by financial companies like the European Investment Bank to deserving businesses to help in expansion and purchasing equipments. Grants are usually interest-free and do not require repayment.
Venture Capital
This is a direct long term investment offering additional business fund for the company in exchange for a share in ownership of the business.