Your alternative funding options

 

An outright stake sale might not be the best fit for your company. Here are three different paths you could take:

Asset finance:

A loan to pay for a particular business asset, such as a vehicle or piece of machinery.

Pros

• Interest rates can be competitive if you are able to go through a mainstream bank, and you won’t need a huge down payment.
• You may be able to own the asset outright at the end of the loan term, upgrade the asset, or return it.

Cons

• Due to interest payments, it can be expensive to use asset finance rather than cash.
• The whole asset isn’t tax deductible while you’re paying for it — only the payments in the liabilities column on your balance sheet.

Crowdfunding:

Reward-based crowdfunding through websites such as Kickstarter or Pledgeme.

Pros

• Can be useful for market validation.
• Appeals can be launched by early stage growth companies, and those working off prototypes.

Cons

• Potential intellectual property concerns if an idea is made public.
• Compelling public offerings can be time-consuming.

Peer-to-peer lending:

Websites including Lending Crowd link borrowers with people willing to lend small amounts. Peer-to-peer lending platforms are relatively new and you should do your research before considering this option, including checking the latest guidance on the Financial Markets Authority website.

Pros

• Lending process is less time-consuming than a bank loan, with interest rates occasionally lower.
• Loans are unsecured — you don’t need to put up collateral.
• You are unlikely to be asked to give up equity in your business.

Cons

• Costs in addition to interest payments may apply, such as setup or platform fees
• High default interest rates (in addition to the agreed interest rates) likely apply
• Missed payments can affect your credit score.
• If you have a low credit rating, borrowing costs can be high.

Like to talk through your options? Give us a call today.