Raising capital

What are the main options for raising money?

There are various sources of finance available for starting or growing your business. The first is that you provide all the necessary money from your personal resources, but this is not an option open to everyone.

If you are starting up, or are already in business and want to expand, then there are two main sources of finance: equity and loan finance. Venture capital firms (including the government supported regional venture capital funds) and business angels can provide equity investments in exchange for shares in your company. They'll be looking for above-average returns and an exit route, usually within five years. They'll probably want some say in the way that you run your business, but can also prove to be an excellent source of expertise and contacts.

If equity is inappropriate, or you don't want external investors, then an alternative is loan finance. This allows you to keep total ownership and control of your business, but you'll probably have to provide personal guarantees. Lenders will look at the gearing (the ratio of loan finance to total finance) and won't lend if the gearing is too high. They'll also look at interest cover - the number of times that forecast profit exceeds interest - and won't lend if this figure is too low.

There may also be grant aid available - from the government (as regional selective assistance, regional enterprise grant or SMART grant); from your local authority; from your regional development agency; or from the European Union (EU). All of these have their own eligibility criteria, so in the first instance, contact a local business adviser.