information and advice - raising finance

Wondered how to raise finance for your business?

Of the many obstacles involved in starting up a business, raising the necessary finance can be the biggest of all. Even if you believe 100% in your business plan, lenders won't necessarily agree with you. And where do you turn to next if they won't back you?

The following are potential routes for raising finance:

London Business Start-Up and Growth Funds

Business Link for London has teamed up with oneLondon to help new and growing businesses that have been refused finance by recognised mainstream lenders.

To benefit from the London Business Start-up Fund you must be either planning to start a business or be in the first two years of trading. To benefit from the London Business Growth Fund you must already be running a sound business and have plans to expand and need funding. Members of the following groups are particularly welcomed: ethnic minorities, over-45's, refugees, residents of housing estates, disabled people, women, lone parents or young entrepreneurs.

The London Business Start-up Fund

Borrow up to £5,000
No interest to be paid, just a management fee
Loan repayable over up to three years by Direct Debit
Repayments begin after a three-month payment holiday
Loans are unsecured
Directors' guarantees required for limited companies
Open to companies located anywhere in London
The London Business Growth Fund

Borrow up to £20,000
Interest for the first 3 years fixed at 3% over the base rate at award of loan
Interest rate is then adjusted and fixed at 3% over the base rate prevailing at the start of year 4, payable for the remainder of the term
An arrangement fee, maximum 0.75%, minimum £75 may be charged
Loans repayable over up to 5 years by Direct Debit after a 3 month repayment holiday
Loans are unsecured
Directors' guarantees required for limited companies
Open to companies located anywhere in London
Match funding may be required

Further information

The London Business Start-up Fund is not in competition with any other mainstream lenders. If your business is able to raise finance through normal commercial sources it will not be eligible for assistance.

For more information contact businessloans@one-london.com or tel 020 7403 0300.

Small Firms Loan Guarantee Scheme

To be eligible for this Government backed scheme your business plan must be considered viable by an approved bank, but not be in a proposition that a bank would normally approve. The Small Firms Loan Guarantee Scheme is available to sole traders, partnerships or limited companies wishing to start up in business to fund expansion. The application is submitted by your bank to the DTI who approves or declines it. Loans can be for up to £250,000 for established businesses (trading two years or more) with a Government guarantee of 85% and up to £100,000 for new businesses with a guarantee of 70%. Small loans of up to £30,000 can be provided without reference to the DTI.

The loan is repayable over two to seven years, and the repayment of the capital element can be delayed for up to two years, Interest is payable from the outset. These loans can be expensive (at 4-5% over base) plus the Government charges an additional 0.5%-1.5% insurance premium for taking the risk. Whilst you can arrange for as much loan as possible, you need only take it up in 25% tranches.

There are a number of exclusions to the type of business being eligible for a loan and for more information contact the DTI or visit www.dti.gov.uk/sflg/

Merton Business Investment Fund
Merton Council has a loan fund to help finance projects involving new ventures and business growth. If your business is located in Merton and employs under 50 people or if you are proposing to establish a new venture in Merton, you could be eligible for support.

You can borrow between £1,000 to £25,000 maximum which should be no more than 50% of the capital costs. The interest rate is 1% above the Clearing banks base rate and the repayment period would be up to a maximum of 4 years. To find out more about whether you could apply, call the Fund Manager on 020 8545 3893 or email freda.owusu@merton.gov.uk