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There are lots of different finance options available for businesses. Read this page explaining the main differences and the key things to think about when deciding which option is the most appropriate for your business.

Equity finance

Equity finance is a way of raising finance from external investors in return for selling a share of your business. The main providers of equity finance are friends and family, business angels and venture capitalists.

Unlike debt providers, equity investors do not have rights to interest or have to have their capital returned by a particular date.  Equity investors are long term investors who earn a return on their investment through dividends and capital growth.  They would usually expect a higher return than debt investors because the risk involved is greater. 

Your business may be suitable for equity finance if it has:

  • fast growth potential and a clear growth strategy
  • an innovative product or service
  • a strong management team
  • strong intellectual property
  • a clear and achievable exit strategy

Equity finance is available from different sources including:

  • business angels
  • venture capital funds
  • family and friends
  • crowdfunding

Bank loans

What is a bank loan?

A loan is an amount of money borrowed for a set period within an agreed repayment schedule. The repayment amount will depend upon the size and duration of the loan and the rate of interest.

Banks usually charge interest on any loans that you get, but the terms and price will vary between providers.

Different types of bank loan include:

working capital loans – for short notice or emergency situations
fixed asset loans – for buying assets where the asset itself is used as a collateral
factoring loans – loans based on money owed to your business by customers
hire purchase loans – for long-term purchase of assets such as vehicles or machinery
.

Start Up Loans

The Start Up Loans Company is a UK-wide, government backed scheme, which offers a repayable loan to individuals over the age of 18 who have a viable business idea but no access to finance. The scheme funds businesses in every sector. As well as financial backing all loan recipients are given access to a mentor, free training events and exclusive business offers.

Individuals wanting to start up a business can access borrowing, in the first 2 years of trading, at 6.2% APR. Loans can be between £1,000 and £25,000 with a repayment term of 1 to 5 years. Applicants can make an application for a Start Up Loan free of charge and will NEVER be charged a fee for making this application or be asked for a deposit.

Family and friends

You may want to ask relatives and friends for support when you need additional business funding.

This can work well, but often arrangements with family and friends are informal and based purely on trust and verbal assurances. Any confusion about the agreement could damage personal relationships, so it is important that both parties are clear about what any investment will involve. Think about whether you need a loan (for immediate, short-term funds) or want to sell shares (for longer term or permanent funding).

Venture capital

Venture capital funding is a form of private equity investment where a business obtains long-term investment in exchange for a share of its equity.

Venture capital funding is suitable for start-ups or new businesses with high growth potential, existing businesses that are expanding rapidly or to fund management buy-outs or buy-ins, or develop new products and move in to new markets.

Venture capitalists typically invest in businesses with:

  • an ambitious but realistic business plan
  • a product or service that offers a unique selling point or other competitive advantage
  • a large earning potential and a high return on investment within a specific timeframe, eg 5 years
  • an experienced management team with a proven track record in the sector – although venture capitalists tend not to get involved in the day-to-day running of the business, they often help with a business’ strategy, can appoint non executive directors to the company and board observers

Business angels

What are Business Angels?

Business angels invest in businesses in exchange for a share of the business’ equity. Most business angels invest between £10,000 and £750,000.

Business angel investors usually invest in start-ups or young businesses that need to fund activities like product development or market expansion. They can make investment decisions quickly but will still need to see that you have a good business plan before they commit.

Business angels may take an active role in your business and can be a useful source of knowledge, mentoring and contacts.

Business angels may invest alone or in syndicates.

The government encourages business angel investment though tax incentive schemes such as the Enterprise Investment Scheme and the Seed Enterprise Investment Scheme. It is worth finding if your business is eligible as this can help attract angels to invest.

Crowdfunding

What is crowdfunding?

Crowdfunding – also known as crowd financing or crowd sourced capital – is an alternative form of business angel investment. Usually conducted online, it allows a number of investors to individually invest smaller amounts of money into a business. The individual investments are then pooled together to help a business reach its funding target.

Crowdfunding can be a good option for businesses that have struggled to raise finance through loans or other conventional funding methods, but you should make sure your idea is protected before putting it on a crowdfunding website.

Grants

A grant is a sum of money given to an individual or business for a specific project or purpose.

A grant usually covers only part of the total costs involved.

Grants may be linked to business activity, employment creation or a specific industry sector. Some grants are linked to geographic areas, eg those in need of economic regeneration.

Non bank lenders

Business owners often approach banks for loans, but banks are not the only option. Other lenders may be more competitive or more suitable for your business, such as:

  • commercial loan providers
  • peer-to-peer lenders
  • social and community lenders, ie Community Development Finance Institutions
  • family and friends
  • leasing providers
  • factoring and invoice discounting providers (Asset Based Finance Association – ABFA)

If your business has suffered recent losses, has a poor credit rating or has recently been turned down for bank finance, you may find non-bank finance easier to obtain, more flexible and possibly cheaper.

A loan is an amount of money borrowed for a set period within an agreed repayment schedule. The repayment amount will depend upon the size and duration of the loan and the rate of interest.

Banks usually charge interest on any loans that you get, but the terms and price will vary between providers.

Different types of bank loan include:

working capital loans – for short notice or emergency situations
fixed asset loans – for buying assets where the asset itself is used as a collateral
factoring loans – loans based on money owed to your business by customers
hire purchase loans – for long-term purchase of assets such as vehicles or machinery
.

Factoring/invoice discounting

Factoring – also known as ‘debt factoring’ – involves selling your invoices to a factoring company. In return they will process the invoices and allow you to draw funds against the money owed to your business. They will also take responsibility for your sales ledger.

You can use factoring to improve cashflow but it can also be used to reduce administration overheads.

Invoice discounting is similar but your business retains control over your sales ledger.

Your business may be suitable for factoring or invoice discounting if you have:

  • an annual turnover of at least £50,000, although some factors will consider start-ups and smaller businesses
  • a good spread of customers – there may be funding restrictions if a single customer accounts for more than about a third of turnover
  • simple, non-contractual debt
  • low levels of debt more than 90 days overdue

Your business may not be suitable for factoring if you:

  • sell to the public – factoring is only available for sales to commercial customers
  • have too many small invoices
  • have too many disputes and queries
  • are not a sound, reputable and trustworthy business
  • have customers that make part payments or stage payments
  • have complex contractual arrangements or warranty provisions

Factoring is more complex than some other forms of funding. You may want to take professional advice before using factoring for the first time.

Leasing

Your business might need to acquire assets (like furniture, computer equipment or company vehicles) or capital equipment, such as plant or machinery.

You could buy your assets or equipment outright, or you might decide to rent them instead. This allows you to get the equipment and assets you need that you might otherwise be unable to afford. It can also free up working capital for use in other areas of your business and save you from having to take out a large loan to buy equipment outright.

You may want to lease or rent equipment that has high maintenance costs, can quickly become outdated, or is only used occasionally.

There are 3 main types of lease agreement – finance leasing, operating leasing and contract hire – and you should carefully consider which one is right for your business.

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Raise funds with HighCastle

Crowdfunding through equity, debt or reward empowers entrepreneurs to connect with business investors and various people at any stage in their company’s growth phase and raise necessary funds.

Equity

crowdfunding

Raise investment in exchange for an equity stake in your business

  • Investment in exchange for equity
  • Typically offered by start-up, early stage and growth businesses

Debt

business lending

Raise capital through borrowing money from our crowd

  • Offer the annual fixed interest rate
  • Choose the duration – usually up to 5 years

Debt

fixed income

Raise capital by offering your debt-based securities to our crowd

  • Offer the annual fixed interest rate
  • Choose the duration – usually up to 5 years

Reward

crowdfunding

Raise capital from our crowd through reward crowdfunding system

  • Share your idea with our crowd
  • Offer your own product to the crowd in exchange for their funds
{ Your checklist } Here’s an overview of the resources you should consider preparing before fundraising

Before you begin looking for investors, it’s well worth doing the ground work first. If you come across a potential investor and you do not have the materials that they may reasonably ask for, you may well lose their interest and ultimately the chance to secure funding.

Summary/deck

Typically, the first thing an investor would want to see is a summary or a deck. They don’t want to delve in to the full plan straight away so a teaser is the best first step.

Elevator pitch

You need to encapsulate your offering in a short 1-2 minute descriptor that you can deliver to anyone you come across.

Business plan

Keep it concise (no more than 20 pages) and make sure it is easy on the eye and properly proof read.

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Financials

Make sure you have a full suite of financials, including P&L, balance sheet and cash flow forecast. The financial forecast should be based on sound, researched assumptions and justify the need for investment.

Read more
Want to know more? Take a look at our FAQs

What businesses can raise finance on HighCastle?

You can apply if you:

– Have registered as a HighCastle Member

– Are a registered EEA, UK, Ukraine business

– Are not wanting to raise funds for a business involved in gambling, betting, e-cigarettes, anything of a sexual nature

– Have a Business Plan

– Have Financial Forecasts

What are HighCastle's fees?

There is €100 Listing fee to list your business on HighCastle. There is no registration or monthly membership fee.

When an entrepreneur successfully raises their target amount, HighCastle will deduct a Success Fee from this.

There are also Payment Processing Fees, which are deducted by the payment provider when the raised monies are transferred to the Entrepreneur.

Fees are based on which country the payment card is registered in and are 0.5% for UK, 1% for Europe and 2.9% for ROW

This model of charging means we only charge entrepreneurs if they are successful in raising their funding through HighCastle.

How do I get started?

You need to choose fundraising type (equity, debt or reward). In case of equity and debt type you need to submit a pitch application that clearly explains the investment proposition, including a business plan and financial forecasts. If your application is approved you’ll then go live on our site and be presented to our investor base.

Can’t find your answer? Visit our Knowledge Centre for entrepreneurs. If you can’t find answers there, try our live chat.

{ Fees } Our Fees

The decision to be listed should be carefully considered in light of the true cost of going public. In order to issue investment offer and maintain a listing on our markets, an entrepreneur is accountable for several types of fees. The majority of companies eligible for listing on our markets are subject to the following two types of fees:

Listing Fee

There is €100 Listing fee to list your business on HIGHCASTLE. There is no registration or monthly membership fee.

Successful Fee

When an entrepreneur successfully raises their target amount, HIGHCASTLE will deduct a Success Fee from this.

  • $100 000 or less Equals to 10%
  • $100 000 - 300 000 Equals to 8%
  • $300 000 - 500 000 Equals to 7%
  • $500 000 - 1 000 000 Equals to 6%
  • $1 000 000 - 3 000 000 Equals to 4%
  • $5 000 000 and over Equals to 2,5 %