Equity finance options

Private equity 

Private equity (PE) investors make medium- to long-term investments (typically four to seven years) in established companies with high-growth potential.

PE is a viable option for companies that are planning to make significant changes to scale the business – perhaps as part of an exit strategy – and can be an attractive alternative to listing on the stock exchange.

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Crowdfunding

Equity crowdfunding provides companies looking for finance with a way to connect with vast numbers of potential investors, some of whom may also be customers. Crowdfunding may be an option if you are a start-up or small business with a compelling proposition and strong business plan.

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Debt finance options

Asset-based finance

Asset-based finance is where lenders make funds available, secured against the company’s assets. It is only available to established businesses with assets and trading history. 

Ownership of the assets is retained by the lender for the duration of the contract. Such lenders prefer to deal with manufacturers, distributors and retailers who possess assets with a high recoverable value and a measurable residual value at the end of the borrowing period.

Asset-based finance is a collective term for invoice finance and asset-based lending. Invoice finance includes factoring, invoice discounting and supply chain finance.

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Business bank loans

Loans are for a set period and have set repayment dates with fixed or variable interest applied. These are normally secured by a charge over asset(s). There are often conditions attached to the loan (covenants), which can trigger a demand for immediate repayment if they are not met.

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Export or trade finance

For businesses trading across borders there are a number of finance options to support the purchase of goods and to mitigate risks of producing goods for export. Export finance helps mitigate risks, such as default or delayed payment, and can include other types of finance, such as factoring or invoice discounting. 

Traditional export finance tools include: letters of credit, and bonds and guarantees.

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Hire purchase, leasing or hiring and mortgages 

Asset(s) can either be purchased outright or paid for by instalments. There are various types of deferred payment – hire, hire purchase or leasing. Normally used to finance a property acquisition or to expand an existing business premises. It is similar to a bank loan, with the mortgage usually being secured over the premises. 

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Overdraft

The lender offers an overdraft facility with a limit, with an agreed interest rate and probably secured. The business can dip in and out of the facility up to the limit. 

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Options by finance plans