Types of small business finance

Woman checking her finances

There are two main ways you can finance your small business and today we wanted to write a small article to help explain to you how small business finance can be used to grow your business.

There are two main types of finance:

  • Debt finance
  • Equity Finance

Debt finance is when you borrow money from a lender and pay it back within an agreed time frame.
Equity finance requires an investment in your business – whether your own money or someone else’s money.
We are specialists in commercial debt finance. Here are some of the most common forms of debt finance

Loans – There are a number of reasons you may want a business loan. It could be for equipment purchase or to purchase inventory. Loans are often short term

Overdrafts – Your business may acquire an overdraft to help manage cash flow at certain times throughout the year

Commercial mortgages – Your small business may purchase property to grow the business. It could be bigger premises or it could be other premises in a new location. 

Lease and hire purchase – Some business owners may get a lease or hire purchase instead of a loan to purchase a vehicle or equipment.

Debt finance is borrowed money that you pay back with interest within an agreed time. 

There are a number of reasons you may choose debt finance

You own your business – Equity capital may involve you giving up a share in your business. This is not an issue with debt finance. You maintain full ownership of your business. You don’t have to answer to investors.

You don’t have to share profits – When you haven’t added shareholders, you will be able to hold onto all profits, instead of making a payment to shareholders. 

You may be able to claim tax deductions – It’s possible that any interest payments that you make would be tax-deductible. You need to speak to an accountant to obtain advice. 

Equity capital involves an injection of capital into your business – often in the form of an investment or buying a share of the business. There are many sources of equity capital.

Family and friends – Family and friends want you to succeed. But you need to be careful managing relationships in case something goes wrong. 

Crowd Funding – The internet has seen the prevalence and growth of platforms like Kickstarter, where people pre-commit to purchasing your product or service. You secure your revenue upfront to mitigate risks in your business

Venture Capitalists and Angel Investors – whether a start-up or an established business, venture capitalists and angel investors may make an investment in your business. 

Floating on the Stock Exchange – Issuing shares to the public are another option to grow your business. 

Our experts can help you secure debt finance. If you speak with one of our experts we can help you prepare your application and provide the right documentation. We’ll help you choose the right finance product for your needs and calculate your repayments so you can be sure that you will be able to service any loan that you get.

We’ll ensure that any repayments don’t affect cash flow and do not negatively impact your business. If you need to secure business finance, get in touch today for a no-obligation chat. 


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