Where to go when the banks say ‘NO’

by Glen Feechan

Although there are signs that the banks are gradually starting to lend again, it is not at anything like the levels business has been used to. I am sure many of you will be very aware of the lack of finance available from the banks even with a profitable business. What these same banks have done to the economy might bring you down too and they can’t take the risk!

Against this backdrop, I thought it might be worth looking to see if we can come up with some ways of accessing funds between us, without the banks’ help.

I have suggested a few routes to look at below, but I am keen that anyone should add their own ideas to the comments on the blog post so that we can all use this as a resource.

One of the more obvious routes is financing fixed assets you already hold, for example the refinance of properties and/or equipment/vehicles. Although finance is still tighter in these areas than it was, you may well have better luck than approaching the banks.

Another option along the same lines is to fund your debtors through factoring or invoice discounting. Due to the current climate you may not be able to fund as high a percentage as previously but this could be a very useful option.

If you are based in the UK, at FC Procurement we work with good suppliers in both of these areas, if you wish to explore the options.

Equity funding may be an option for some, maybe through business angels for smaller companies. However although funds are likely to be available, investors are looking for bargains and know they can get them.

For smaller businesses, short term loans from friends and family may be an option but think carefully, as if things don’t work out as planned you may damage a lot more than your credit rating.

One of the more innovative ways of accessing funds we have come across has now been used by a number of our owner-managed (UK) clients. It is now possible, under certain circumstances, to access personal pension funds to invest in private companies. A number of clients have used this method to access money tied up in pension funds from previous employers or in personal pension plans to invest cash in their own business.

This essentially brings a new equity investor into the business, without having to find one, allowing the long-term growth of the business to accrue to the owner for his/her retirement. This route may not be for everyone and you will need to talk to an Independent Financial Advisor (IFA) to discuss whether it is the right route for you. If you want to know more, we work closely with an IFA with experience in this field and can introduce you. Just drop me an email (glen@feechan.co.uk) or call on 0845 6439693.

These are just a few ideas, but please add your own in the comments below. Together we can get through whatever is to come.