High street banks generally have a penchant for risk-averse lending and tend to restrict themselves to a narrow selection of products that have become commoditised. This means that in a growing number of cases the banks are either unwilling to extend financial support or their offer meets the banks needs rather than the clients. Unless your requirement is the equivalent of a banking 'no brainer‘ you can end up spending a lot of time to no avail.

If you can‘t get funding from your bank the first thing to realise is that there are many independent specialised lenders sitting behind the high street waiting to do business with you. The best thing about them is that because they‘re prepared to specialise they can take a much more experienced view of your assets and therefore analyse the risk in a much more positive way. This can allow them to lend more money against an asset, lend at a cheaper rate and potentially provide a much better service.

This is good news for business owners looking to borrow money to grow their business. The bad news, or rather the challenge, is knowing who these specialised lenders are, where they are, and how best to approach them to get what you want.

Typically the better informed your decision when it comes to funding, the better the deal you will get. As with all buying it‘s important to analyse and compare a range of options and suppliers.

Business finance brokers are well placed to provide independent, impartial advice to business owners and typically their advice is free. They advise on the most suitable financial product and the most suitable lender to meet their needs. The same product from different lenders can be a very different proposition. Importantly, a reputable broker should be able to walk through any hidden costs or contract clauses that could result in unexpected costs being incurred. Headline rates are there to attract attention and are not necessarily an indication of the cheapest facility.

Whether using the traditional high street banks or specialised independent lenders there are considerations any business should keep in mind.

Business owners looking to expand their company should consider the following:

• Use the assets you are looking to acquire to help secure the finance

• Use a suitable time scale for the funding. Do not use long term funding for short term assets and vice versa

• Will you look to repay any facility early? If so you should structure the facility in a manner that will avoid redemption penalties

• Do not be fooled by headline rates! Consider the total costs involved

• Be entrepreneurial. There is a cost to borrowing money but if this allows you to make more money then it is a worthwhile expense

For more information see www.fundingsolutionsuk.co.uk

Given the inexorable rise in interest rates and the resultant fall in cash available, unfortunately the choices are shrinking. A staggering 18% of small companies are now funded using credit cards; you do not have to justify your decisions to the bank manager and 0% deals make them feel attractive. However, such funding is not smart or prudent into the long-term, and it is certainly no way to fund a serious business.

Business angels are the only viable alternative out there. They are wealthy individuals, many of whom have already made their money and now want to give something back. Some will be in it just for the return on investment, but it is more likely they are keen to stay engaged with the business community or to mentor younger entrepreneurs.

One advantage of angel funding is the contacts they bring with them. It is in their best interests to get these deals to fly so they will introduce you to all of their friends and business contacts, who will usually be influential in their own right.

You may have noticed that angels do not tend to advertise, so how do you find them? The first stop is your accountant and lawyer, friends and business associates. Most of these will have friendly angels or know of someone who knows someone.

The British Business Angels Association website (www.bbaa.org.uk) lists details of each of the major angel networks in the UK and has good advice on the pros and cons. Housing many deal-hungry funders under one roof is efficient and can save a lot of time as one pitch can reach many angels.

However, you may be asked to pay an upfront fee and a back-end success fee, so that if you are looking to raise £100,000 the fees could easily amount to £10,000. Another option is Angels Den, which launched on 1 May 2007 and offers an affordable and accessible way to reach business angels as it does not take equity stakes or success fees and uses straightforward templates in plain English to submit business ideas. Applications are reviewed by external business analysts who give feedback to the entrepreneur. It costs £99 to upload your business concept summary and £400 to then upload your business plan for angels interested in your idea.

While business angels now provide the only truly viable means of funding business expansion plans, the good news is there is more help available now to reach them, accessing not only their financial support, but also their business contacts, experience and advice.

For more information see www.angelsden.co.uk

Factoring products are specifically designed to help business expand. The facility is only suitable for B2B-type businesses. The factoring industry is now the largest provider of finance to small companies in the UK; about two years ago it overtook bank overdrafts as the preferred method of funding business cashflow requirements. The factored turnover through members of The Factors and Discounters Association exceeded £173bn last year and funds out exceeded £13bn.

First of all, let‘s describe what factoring is. It is an agreement between companies for the sale and purchase of debts on a continuing basis. By this method you can turn a credit sale into cash sale.

You can see that by turning your credit sale into a cash sale you can improve cashflow. This will enable you to pay for your purchases more quickly which will enhance your credit rating. Other advantages you can enjoy are being able to negotiate discounts for early payments on your purchases. These discounts can offset the charges of the factoring. Other benefits are that you can make bulk purchases for cheaper prices. The factor pays an agreed percentage of the invoice within 24 hours of receiving the invoice for a completed sale.

You also outsource the collection of debts. This reduces your variable costs of running your credit control function as most factors or invoice financers charge a percentage of the turnover, so if one month your turnover falls so do your costs. Your costs are directly related to your sales. You also lose the problem of staff cover when your credit controller(s) have holidays and sickness and you gain the experience of the factor‘s credit management functions, which are widespread across many industries. Let‘s give you a brief description of how it works.

• You receive an order

• You deliver the product or complete the service

• You produce an invoice and send a copy to the factor

• If you require the funds, the factor sends them electronically into your account within 24 hours of receipt of the invoice either by BACS or CHAPS

• The factor sends out the statements to your customer

• The factor collects the payment from your customer

• The factor then pays the balance of the value of the debt minus their fees.

This is the only financial product where the funds available to the business are directly related to the sales of a company, thus releasing one of the constraints that businesses suffer, namely lack of cashflow.

In fact, factoring is only a tool. Used wisely, it can benefit a company‘s expansion but used unwisely will hasten the demise of a company. Nobody would consider using a plugged in, switched on, electric drill as a hammer to knock in a nail. Likewise monies received from factors for invoices factored should be used to pay trade and preferential creditors and not for capital purchases such as machinery or vehicles.

For more information visit www.charterhousefactoring.com