Newspaper article The Journal (Newcastle, England)

Funding Options Which Can Help Businesses Grow

Newspaper article The Journal (Newcastle, England)

Funding Options Which Can Help Businesses Grow

Article excerpt

Last month saw the announcement of the Fastest 50 Awards for 2005, celebrating the achievements of the fastest-growing companies in our region. As a follow-up to the awards, Duncan Reid assesses the funding options open to companies looking to grow.

1. My business needs capital in order to fund its growth ( what are my options?

There are a number of funding options available to businesses in our region to support expansion. The key ones are:

* Banks provide a useful source of debt finance, whether for working capital or acquisition purposes.

* Venture capitalists and business angels are looking for investment opportunities in fast-growing companies.

* Private placings, whereby a company sells shareholdings to a number of high net worth individuals through an `offer' document or information memorandum.

* A flotation can be used as a means to raise capital. The Alternative Investment Market provides smaller businesses with a route to flotation to increase their profile, access capital for growth and increase the company's ability to make acquisitions using shares ( all of which can stimulate an accelerated rate of growth.

2. I run a fast-growing, early-stage business ( who will fund me?

Bank funding is an option, although if you are an early-stage business, with a limited asset base, a bank may be concerned about the availability of security for the loan. It may also be concerned about the ability of your business to maintain good cash-flow to ensure payments of interest, and repayments of capital.

The loan guarantee scheme, where the loan is partially backed by a Government guarantee to give the bank some security for repayment, is a possible route to growth.

However, a more likely source of funds is from someone who will take a shareholding (or `equity') in your business, whether this be a venture capitalist or a private individual. This sort of investment is ideal for an expanding business if it is going to take some time to generate consistent returns, as venture capitalists/business angels are invariably looking for capital growth and not an income return. …

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