Finance & Funding Jargon Buster

You can’t know what you don’t know, especially when it’s wrapped up in abbreviations and buzzwords. Start.Biz are decoding the most commonly used jargon words when looking for business finance or a funding.

P&L 

Profit and Loss Account – a record of Income and Expenditure within a given 12-month financial period to ultimately determine profitability.

Balance Sheet 

A snapshot of the Assets and Liabilities owned/owed by a business at any particular moment in time i.e. Cash Balance or Value of Outstanding Loans. The value between the Assets owned by a Company after deducting the Liabilities it holds equates to its Net Assets.

Cash Flow Statement 

A log of monthly cash inflows/outflows often using a combination of retrospective and forecast information. For a small business, this is probably the key document to managing cash flow.

Working Capital 

This represents a measure of liquidity on a day-to-day basis within a business and is calculated after deducting liabilities such as supplier invoices/debt/PAYE/VAT from assets such as cash/customers invoices/stock.

MI 

Management Information – lenders often require Management Information such as Aged Debtor/Receivable reports and Management Accounts.

Statutory Accounts 

Financial year-end accounts as produced by the Directors of a business and filed with Companies House.

Management Accounts 

Monthly record of Management Information usually comprising Profit and Loss Account, Balance Sheet and Cash Flow Statement

Aged Debtors 

A report of amounts owed by your Customers to the business.

Aged Creditors 

A report of amounted owed to Suppliers by the business.

SALIE 

Statement of Assets and Liabilities – a form usually completed when looking to borrow money comprised of i) Personal Assets & Liabilities (owned/owing), ii) Monthly/Annual log of income/expenditure.

If you have any questions about financing your business or would like to discuss your personal circumstances, please contact our expert team today. 

Access to Finance Consultation Line: 0800 069 9090 (freephone) or email finance@start.biz

Business Finance & Funding FAQ’s

What finance is available to me if I haven’t started trading? 

Start Up Loans are government backed loans where the borrower/s can each borrow up to £25,000 to a maximum of £100,000 for any one business at a Fixed Interest Rate of 6% Start Up Loans – click here to find out more.

What funding can I access if I have been trading for 6 months, 1 year, 2+ years? 

There are lots of options ranging from High Street banks to Alternative providers (i.e. Responsible Finance providers) to Asset-backed lenders (Invoice & Equipment finance specialists).

What key business documents do I need when applying for trading? 

Annual Statutory Accounts, Management Accounts, Profit and Loss Account, Balance Sheet, Cash Flow forecast and Personal Assets & Liabilities Statement.

Who should I go to first when looking for a business loan/access to finance? 

If you have been trading for more than 6 months, try your local Growth Hub – they are a great centralised place to receive connections to finance providers from. Alternatively, give us a call at Start.Biz.

If I get turned down by high street banks for a business loan is there any alternatives? 

There are lots of alternatives. A good place to start would be to look for local Responsible Finance providers who often offer the required level of finance whilst also appreciating the need for SME Business Owners to get decisions on funding quickly. Click here to find out who provides responsible finance in your area.

How much can I borrow? 

This will depend on a number of variables:
i) The level of profitability currently within the business and moving forwards is critical. The more profitable you are, the more likely you are to get higher levels of finance.
ii) Whether the Business Owner is offering a Personal Guarantee to secure the loan
iii) The quantum of investment that the Business Owner is putting in

Can I get a grant? 

Yes but this will be dependent upon the criteria of each individual grant. A good place to start would be to sign up The Innovation Factory’s (Drew Currie) monthly newsletter, click here to sign up for free.

Can I get a project funded? 

Possibly but a bit like Grants, it is entirely dependent on the funding resource in the market at that time. Innovate UK offers Loans and Grants with a focus on business’ growing via Innovation, find out more here.

What kind of business activity can I get finance for? 

You can apply for finance for a multitude of activities including:
– Business acquisition/merger
– Asset purchase
– Invoice Finance
– Refinance
– Working Capital/Cash Flow

Are there still any covid recovery schemes available? 

The Recovery Loan Scheme (RLS) is available until 30th June 2022

What is a good interest rate? 

The Interest Rate applied is often directly linked to the perceived level of risk with the loan itself. High Street lenders will lend at 3% + the Bank England’s base rate of lending. Currently, SMEs are finding it harder and harder to access funding at these rates via the High Street. Rates for SME’s can range from as little as 6% right up to 14%. Sometimes the easiest thing to do is secure finance at a higher level of interest to get the required funding before then refinancing at a later date at a better rate of interest.

If you have any questions about financing your business or would like to discuss your personal circumstances, please contact our expert team today. 

Access to Finance Consultation Line: 0800 069 9090 (freephone) or email finance@start.biz 

Different Types of Business Finance Explained

Accessing the right debt finance for your business can be hard – the debt market is very noisy and has some sharks patrolling its shores. Despite this, raising finance is a very common requirement for the majority of businesses whether they are a start-up or large Corporate.
Before taking on any new debt, the first question we always think requires serious consideration is “Do I actually need it?” Can the business get where it needs to be in the same timeframe without the debt, albeit with a bit more difficulty along the way? If so, don’t take the debt on and endure the short-term pain for the long-term gain.
If taking on new debt is the right option for the business, then we typically see this taking one of three formats:

1. Finance for Growth: 

Start Up Loans – Typically aimed at the pre-start/early stage marketplace, Start Up Loans are government backed loans where the borrower/s can each borrow up to £25,000 to a maximum of £100,000 for any one business. Critically, these loans are personal loans and repayments will be made by the individual. Interest rates are 6% which is reasonable relative to the high-risk nature of the loans themselves.
Working Capital – “Revenue is vanity, profit is sanity, cash is King.” Every evolving business has its working capital pinch points and cash management is one of the biggest challenges that SMEs face. Working Capital finance can give a business the breathing space it needs to manage its growth, hire new staff, take on new contracts etc.
Assets/Equipment purchases – Raising finance for equipment, vehicles or acquiring a property is a natural evolution in most business’ growth. There are a variety of ways to fund an asset-led deal which can work well for a borrower and add some tangible value to a business’ Balance Sheet. When allied with certain tax breaks (Capital Allowances) that businesses can currently receive, they are well worth consideration as a business looks to expand.

2. Finance for Mergers & Acquisitions: 

A Merger or Acquisition can be a great way to accelerate business growth and profitability. Certain sectors such as Technology and Healthcare are ripe at the moment for consolidation. Raising finance in this area can be challenging and requires a substantial amount of due diligence and financial analysis and forecasting. Getting the right finance package in place can be one of the key determining factors between a good deal and a bad one.

3. Finance for debt management/refinancing: 

In our ever-changing and unpredictable world, a rise in the Bank of England’s base interest rates can have a meaningful impact upon monthly debt repayments. As a result, refinancing debt via a cheaper provider or looking to extend the term of a repayment can ease cash pressures and allow management to focus on the core activities of the business.
At Start.biz, we have 15 years’ experience raising debt finance in all of the above areas and have built a network of industry contacts over this period to introduce our clients to. Give us a call on 0800 069 9090 or e-mail via finance@start.biz to set up your free consultation.

The Basics of Seed Funding

What is seed funding? 

Despite the varying terminology, seed funding, seed capital or seed money are all the same form of investment. It is essentially the first official equity funding stage and typically represents official money that a business raises from an outside investor in return for a stake in the company.
Seed funding tends to be done at the very start of a businesses life and is the early financial support which initially helps to grow the business in the early stages to inject much needed funds into the project. Almost every company will get an initial investment through seed funding, however it is becoming more common in recent times with new start-up businesses cropping up.

What is seed funding used for? 

Seed funding can be used for a wide variety of things and is ultimately designed for a company to do with as it sees fit. Some investors will stipulate what they wish for the money to go towards, whereas others will not.
Seed funding is generally used to help project the company into the next round of funding or to finance it’s first steps including the likes of product development, market research and much more so that it is in a position where it can generate its own income. With the right dedication, business strategy and perseverance the company should hopefully start to grow from this initial investment.

Who can invest via seed funding? 

Almost anyone who has a bit of money can invest via seed funding from family and friends to founders and more. Many companies tend to prefer to have investors who are known and are close to them, however, outside investors, such as venture capital and angel investment can also be seed funders.
Angel investors are those who tend to invest in start-ups and are classed as a riskier venture as there is no previous track record of the business so far. In exchange for their investment, they tend to expect an equity stake in the company. Venture capital financing is a private equity capital that can be provided at various stages or funding rounds.
Many start-up businesses tend to get their seed funding through other projects too such as via crowd funding systems and Kickstarter among others.

What do seed funders get? 

Seed funding is ultimately just a stage of funding rather than a method or way of funding. They will usually invest in a part of the company so they will usually benefit if they decide to sell their shares to another investor or from any of the stock equity should the business decide to go public. If a company has crowdfunded, the business could have various offerings for their investors including bonuses for their investments or even early access to certain services of products depending on what the business offers.