Methods of Finance

February 5th 2014 | Posted by phil scott

Innovative ways to access finance

As nearly all FDs will have experienced, the availability of finance from traditional sources is much less readily available and the process of accessing it has become a longer, more detailed and drawn out affair.

At a recent FD Recruit CFO & FD Conference, the delegates in attendance discussed the merits regarding other options of finance available for businesses.

Many cited that some banks were more receptive than others and that the key to success was to develop personal relationships on a local basis; and that it was the lack of personal approach and understanding that was a major hindrance.

It was also discussed that as well as the FDs and CFOs holding good relationships, that the wider management team should be involved when approaching banks for any new applications.

Delegates also suggested that some industries were looked upon more favourably when it came to what funding and finance was available, with manufacturing seen as the most likely to access capital.

• Asset based lending and Invoice finance
– Asset finance
– Trade finance
– Bridging loans and property finance
With invoice discounting now far more commonplace than ever before, delegates discussed how this route had progressed significantly since the start of the economic downturn and the specialist options available through asset based lending are now much more competitive and sensibly priced.

• Private equity
Private Equity is becoming a more common route for businesses, some FDs had experienced the possible constraints, including loss of control and more complex reporting. However on the plus side it opens up routes to benefit from expert guidance, more thorough structures and the injection of new specialist skills.

• Equity finance
Delegates have seen an emergence of specialist investors identifying target businesses in some distressed markets and industries.

• EFG loans
This government scheme aims to facilitate lending to viable businesses that have been turned down for a normal commercial loan due to a lack of security or a proven track record. Where EFG is not suitable, other options may be available through the Regional Growth Fund or similar local schemes, again sometimes for specific industries or sectors.

• Business angels
These high net worth individuals provide investment, and often contribute three fold through their involvement, direction and mentoring.

• Mergers and acquisitions
Many delegates suggested that in their experience merger and acquisitions with competitor or complimentary businesses was a successful way to increase finance, as well as market share.

The above article is for guidance only and is a summary of the main points discussed during our FD workshops. For assistance with financing please contact your advisor within your local auditors.