Following an historic election last July, Britain voted ‘leave’ from the European Union. On the 29th March 2017, Theresa May officially triggered Article 50, which has triggered the process for Britain to leave the EU.
Brexit impacts UK businesses in many ways; the pound is much weaker so exporting goods becomes easier, however, trading overseas will have its challenges around new taxes / duties, and passporting rights (several US / Asian companies establish in the UK to access the EU).
Accessing finance for businesses
At some stage in most business life cycles, finance is often required to help maintain or grow a business, whether you are a startup or a large company.
Let’s not beat around the bush: getting finance for your business is hard.
A recent FSB study showed that 40% of UK businesses intend to grow into other markets and invest in growth in 2017, yet still, over 50% of CEOs put raising finance as one of the biggest challenges their business faces.
Why do businesses need finance?
Businesses might want to access finance for a variety of reasons, such as:
- Growing and expanding into new markets
- Addressing working capital challenges- bridging the gap between getting paid and paying parties in the supply chain
- Research and development
- Purchasing an office or commercial property
- Testing a new idea and bringing it to market
Here we list 3 innovative ways that business owners and CEOs are financing their businesses:
What is crowdfunding? Simply put, crowdfunding is a bottom up type of finance where consumers group together to invest in businesses or products. The aggregate of this can be used to finance business.
Some record deals and extraordinary business funding feats have come out of crowdfunding. Examples include;
- The App-only bank Monzo has raised £1 million on Crowdcube in just 96 seconds in March 2016
- The pebble e-paper smartwatch raised $20m on Kickstarter from over 78000 backers
- The Ice Bucket challenge was a charitable fundraising campaign, raising $115m for ALS research
What’s in it for the people?
It varies. Some crowdfunding platforms are ‘feel good’ investments – many investors are philanthropic and donate for the greater good. Others aim to give people returns – investors are able to own equity in a company and cash out at a later stage.
2 Invoice finance
Many businesses are constrained through working capital issues meaning there is a payment gap between receiving payments and paying for costs. Invoice finance is fairly innovative, and is now fairly common in the market, thanks to disruptors and new finance providers who are able to fund invoices up front, in real time.
Invoice finance allows companies to worry less about waiting for payments, and some options allow the financier to chase up payment on behalf of the company.
3 Trade finance
Trade finance is the new funder on the block. 31% of businesses expect exports to grow, according to the FSB.
Trade finance is an umbrella term used for the financing of any import or export of goods / services overseas. Many businesses trade in multiple countries, and the financing of this can be hard, especially when figuring out whether to trust a supplier or an end customer. Fortunately trade finance provides several mechanisms to fund this growth through Letters of Credit (a bank will own your stock or goods whilst it’s transported between a supplier and a buyer), or through warehouse finance.
Many small businesses are tapping into financial institutions for trade finance because they can finance somewhat risky export finance and grow their companies in different markets.
FIGURE 1: Changes in value of exports, net percentage balance – previous three months and expectations for coming three months; proportion reporting increase less proportion reporting decrease. Source: FSB – Verve ‘Voice of Small Business’ Panel Survey
Brexit is certainly an uncertain time for many UK businesses, but effective cash flow management and appropriate funding measures to ensure the company can continue to grow and service clients and customers is essential. Be sure to look into different finance products and look at what is most appropriate for your company when considering options.
Written by James Sinclair at Trade Finance Global.
from Finance Girl http://www.financegirl.co.uk/how-to-get-business-funding-post-brexit/