UK banking start-up Monzo (formerly Mondo) has closed a funding round of £60 million with a valuation of £1.25 billion.
As of its last valuation in June 2019, Monzo was ranked as the UK’s second most valuable start-up at £2 billion, 40% up from its current status. This latest valuation brings the firm closer to levels seen in 2018.
Most investors who participated in the funding round, including Y Combinator, Accel, Goodwater Capital, General Catalyst, Thrive Capital, Orange Ventures and Passion Capital, were existing investors in Monzo. However, the round also drew funds from at least two new investors: Swiss fund Reference Capital and Vanderbilt University.
A second, smaller part of the funding round, which could see an additional £40 million invested in the business, is set to close in the coming months.
Earlier this month, Monzo told employees that it would cut up to 120 jobs, or 8% of its workforce, owing to the impact of the COVID-19 crisis. The company has also shut its Las Vegas office and furloughed 300 UK employees.
Even before the pandemic swept Europe and the Americas, however, Monzo was losing money. During the twelve months ending in February 2020, the company lost $57.3 million in a push to grow its number of account holders.
When you are running a business, you will be doing many different things at once which can make you feel a bit distracted and draw your attention away from important things. For instance, you might start to put things off and before you know it, you have a lot to catch up on.
It can be especially easy to neglect your finances, and this can lead to further issues. To help you with this, we have put together some tips on how you can get on top of your finances.
Set Some Time Aside to Go Over Your Finances
One of the easiest ways that you can keep on top of your finances is by making sure that you set aside some time out of your day to go over them. It is important that you make the time to go over your business finances because this way you will know what payments need to be made and when. When you know what you need to pay, you will be able to look at your budget and make sure you have the funds to keep stable.
Stick to Payment Deadlines
The next way that you can get on top of your finances is by making sure that you stick to payment deadlines that need to be met. It is important that you do this in your business because if you miss dates you will have to pay more back in a lump sum, and be affected by even larger interest rates. If you can’t stick to payments when they are due, it can cause a lot of other problems as it can get in the way of business agreements and can lead to problematic debt.
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Consider an Investor
If you just can’t get in enough money to keep your finances stable, you still have other options to try. One of the other options that you can consider is getting in touch with an investor. Not only can an investor give you the funds that you need, but they can also give you advice and point you in the right direction when it comes to your business.
There are many different investors that you can consider getting in touch with such as Tej Kohli, Jeff Pulver or even your bank. Make sure you have a look so you can find the best option for your business.
Make Sure You Keep This Article in Mind
There are many different ways for you to keep up with your finances and in this article, we discussed some of the different options that you can consider. As long as you are able to stay on top of your finances, you should be able to get your business operating at its full potential.
The banking and finance sector has provided over £4.1 billion to SMEs so far through the Coronavirus Business Interruption Loan (CBIL) scheme, UK Finance revealed today, as part of a broad package of support to help businesses through these tough times.
Over £1.33 billion of loans have been approved in the week from 21 April to 28 April 2020. The number of loans provided through the scheme has increased by 8,638 over the same period to a total of 25,262, an increase of over 50%.
The banking and finance sector is providing a range of support to SMEs to ensure they can receive the help most appropriate to their needs, including capital repayment holidays, overdrafts, working capital extensions and asset-based finance.
Lenders have received 52,807 completed applications under the CBIL scheme so far. 25,262 of these applications have been approved to date, while more applications are still being processed and are expected to be approved over the coming days.
Following reforms to the CBIL scheme introduced this week by the Treasury and British Business Bank, supported by regulators, the largest lenders have announced they will not require forward-looking financial information and will only ask businesses for information and data they might reasonably be able to provide at speed. This should streamline the application process and help lenders provide financing to businesses who need it as quickly as possible.
The banking and finance sector is providing a range of support to SMEs to ensure they can receive the help most appropriate to their needs, including capital repayment holidays, overdrafts, working capital extensions and asset-based finance.
The British Business Bank approved four more lenders for accreditation under the CBIL scheme this week, bringing the total number of accredited lenders to 52. This means businesses can now access financial support under CBILS from a wide variety of firms.
The industry is also working closely with the Government and regulators to deliver the new Bounce Back Loans scheme which will make it quicker and easier for smaller businesses to apply for and access the finance they need.
Stephen Jones, Chief Executive of UK Finance, said: “The banking and finance sector recognises the role we must play in getting the country through these tough times, and staff are working incredibly hard to get money to those viable businesses that need it.
“More than £4 billion has been delivered to over 25,000 businesses so far through the CBIL scheme, as part of a broad package of support for SMEs including capital repayment holidays, extended overdrafts and asset-based finance.
“The changes to the scheme announced by the Chancellor this week will enable lenders to streamline their application processes and help even more businesses access the support they need.
“This extensive support will be complemented by the new Bounce Back Loans scheme targeted at smaller businesses, which lenders are now working at pace to get up and running from Monday.”
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Case Studies
Chosen Care Group - Homecare services for the elderly
Chosen Care Group ltd, which provides domiciliary care to elderly and vulnerable people in their own homes across Essex, received a £1 million loan from Barclays through the CBIL scheme. The loan will help allow Chosen Care Group ltd continue to provide valuable in-home care during the COVID-19 crisis. The company of 240 employees was nominated for the Great British Care Awards in 2018.
London Drum Company — Drum and percussion supplier
London Drum Company, a supplier of drum and percussion instruments based in Deptford, saw a significant drop in income after gigs and concerts across the world were cancelled or postponed due to COVID-19. The company received a large loan from HSBC UK under the CBIL scheme, which has enabled it to replace its lost income streams and purchase new equipment for its workshop space, an area of the business that can continue to grow despite the current climate. This will help put the business in a strong position to support the UK music industry when the government restrictions are lifted.
Pallet Plus - Logistics company transporting medical goods
Pallet Plus is a logistics company in Colchester, Essex, with 48 employees and a fleet of 28 vehicles. The company has enabled the transport of vital goods throughout the pandemic including Personal Protective Equipment (PPE), medical consumables and ventilators for delivery to the NHS and care homes, as well as goods to supermarkets. Pallet Plus also helped to deliver a donation of Easter Eggs given by the confectionary company Mars to NHS hospitals throughout the UK. The company received a £250,000 overdraft facility from Santander UK under the CBILS scheme, to reduce the impact on their business of potential losses caused by an increase in staff sickness or a decline in trading.
Regency Corporation — Independent group of pubs
The Regency Corporation runs 20 pubs across Sussex, each of which are run independently and tailored to the local community they are based in. The company secured a £250,000 loan from Lloyds Bank through the CBIL scheme after having to shut its pubs and furlough its 150 employees due to the COVID-19 lockdown. The loan will boost cashflow, meaning the business can pay its suppliers and its staff until its furlough grant is received from the government.
SXS Events Productions — Corporate events company
SXS Events Productions Limited, a corporate events company based in Bristol, has had to furlough non-essential staff as events have been postponed until later in the year. The firm recevied a £170,000 loan from NatWest through the CBIL scheme. This loan will give the business as long as possible to plan ahead for when events are rescheduled.
Simon Brown, founder and managing director of R&D tax credit specialist ForrestBrown, explains how vital funding for businesses is being overlooked – yet it could be available in just four weeks and need never be paid back.
It barely needs saying that the economy is in crisis. At the start of April, as many as one in five businesses were facing collapse within a month, while 44 per cent say they have just one to three months’ worth of money. The need to find new reserves or additional income has never been more urgent for businesses of all sizes and in all sectors.
The Government is stepping in, with £330bn backing loans from banks. But these have been slow to materialise and there have been a number of challenges along the way. Things have improved after a crackdown from the chancellor, but the loans will still need repaying at some point. Those businesses taking on debt now may be stifled by it when the recovery comes.
However, there is another way. Research and development (R&D) tax credits are a Government incentive designed to reward UK companies for investing in innovation – something we’re seeing a lot of in the battle against coronavirus.
They’re nothing new, having been launched back in 2000. On average, SMEs get about £53,714 per claim based on 2017/18 figures. However, even smaller companies can receive much bigger claims – millions of pounds in some cases. This amount of money could help enterprises remain solvent so they can live to grow.
It may sound mercenary to be looking for “free cash” at a time of crisis, but that would be a misunderstanding of how the credits work. R&D tax credits are a reward for businesses that have already invested in staff, materials and other project overheads. In fact, HMRC itself has found that for every £1 of tax foregone, up to £2.35 of additional R&D is stimulated. Perhaps every £1 invested in saving innovative businesses across the country could save £billions in lost tax revenue, unemployment payments and sluggish growth after the crisis.
Research and development (R&D) tax credits are a Government incentive designed to reward UK companies for investing in innovation – something we’re seeing a lot of in the battle against coronavirus.
One shrewd business using R&D tax credits to help plug the funding gaps and get through this challenging time is our new main contracting client MY Construction.
On 27 March, just five days before their tax year-end, we had a first call where our R&D process was outlined and engagement letter was sent. They were soon approving the submission we had prepared for the year ended 31 March 2018. The amount? Hundreds of thousands coming back into the business when they needed it most.
That’s the transformative potential of this incentive done properly. However, demand is high and the pressure facing the HMRC to process applications is extraordinary. With this in mind, it’s worth getting the claim right first time. With businesses hanging in the balance, there’s no margin for error.
Getting It Right
A claim starts with the gathering of all the appropriate information – usually data such as payroll and accounts. Next comes the identification of qualifying activities and costs, a foot wrong at this stage can cause problems down the line. To be sure, firms really need a specialist so they neither over – nor under claim.
From these identified qualifying activities, a benefit figure can be calculated. But to be accurate, it needs to decisively navigate a host of business-specific complicating factors – like grants and subcontracting arrangements.
Overall it must have a robust methodology behind it. This should include a technical narrative, a summary of costs incurred and how the claim has been calculated. The next step is submitting the report in the way HMRC wants to see it. It’s vital to update the Corporation Tax return amended to include the R&D tax credit calculation.
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More Haste, Less Speed
Even if a business is in hibernation mode right now, it is possible to undertake a claim by collaborating with a specialist to do the legwork for them. But the biggest mistake would be to rush it. There’s been talk of businesses attempting to undertake the claim in 24 hours. This is a recipe for disaster and a sure way of inviting an enquiry into a poor claim that could cost a business dearly when they can least afford it.
However, it can be achieved quickly – if not overnight – with the right approach. Even in lockdown. Many businesses have resorted to home and remote working, and this should be harnessed to ensure the appropriate people are included in the claim process.
In summary, it’s important not to underestimate the value of R&D tax credits done properly. In challenging times, businesses need every bit of help they can get. That means not leaving a penny of the value you’ve earned unclaimed.
On 26th September 2019, Levi Nkunika, FDH Bank’s Head of Marketing, announced the organisation’s investment of MK450 million in football sponsorship.
In launching its five-year sponsorship plan supporting the National League Cup, FDH Bank aims to support rising football talent throughout Malawi. With a prize fund of MK53.6 million, and the eventual winners taking home MK25 million, the National League Cup is setting an all-time record in Malawian football.
Scheduled to run between May and September 2020, the inaugural edition will go a long way towards promoting the sport in Malawi. As a home-grown, forerunning financial institution, FDH Bank recognises the importance of this historic sponsorship deal in inspiring talented young footballers across the country.
As Mr Nkunika explains, no bank believes in the potential of Malawian football more than FDH. In partnering with the Football Association of Malawi in 2016, the Bank recognised the benefits and potential for the sport within Malawi, even when the game was at its lowest level.
Where some saw trouble, the organisation saw opportunity, recognising potential for success through this partnership. Since then, great progress has been made in Malawian football, creating a bright future for the sport in Malawi today.
Attending the sponsorship unveiling, the President of the Football Association of Malawi, Walter Nyamilandu, said the organisation would no longer be accepting new sponsors for elite football competitions. Instead, the Association would encourage organisations with offers to channel funding towards other needy categories, such as youth and women’s football tournaments.
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As Mr Nyamilandu explained, the Bank had effectively raised the bar for football sponsorship, with none of its rivals partnering football in such a serious way. Whereas in the past MK25 million in sponsorship covered the entire competition, the increased funding will benefit not only the eventual winners but the entire sport in Malawi, showing that Malawian football effectively has a father in the organisation supporting it through both good and bad times.
This latest deal follows the bank’s MK180 million, three-year sponsorship of the Flames. The home-grown financial services provider also sponsors the Mayor’s Trophy at a cost of MK10 million in Blantyre, Mzuzu, Lilongwe and Zomba. This year alone, the organisation pumped more than MK160 million in investment into sports events across Malawi, including providing MK1 million in sponsorship for a non-title boxing match between Chikondi Makawa and Limbani Masamba.
About FDH Bank
This home-grown Malawian financial institution is a subsidiary of FDH Financial Holdings Limited. Two other subsidiary companies, namely First Discount House Limited and FDH Money Bureau Limited, are also owned by the holding company.
The Bank operates Malawi’s largest branch network, consisting of 52 service centres and 92 ATMs. As Malawi’s leading digital bank, it provides innovative banking solutions and cutting-edge digital banking products including Ufulu Digital Account and Whatsapp Banking.
The organisation received nine awards at the Chartered Institute of Marketing in 2019, including Marketer of the Year (Levi Nkunika), Marketing Campaign of the Year, and PR Project of the Year.
If there's a single challenge that's central to the successful operation of a non-profit, it's finding a way to keep the organisation on sound financial footing. Unlike conventional businesses, they're reliant on external revenue streams that are often difficult to predict, and even harder to maintain. That overall condition of financial insecurity also introduces countless other management challenges as well. A lack of funding keeps budgets tight, makes it hard to attract the most talented workers, and forces infrastructure needs to take a backseat to daily operating expenses.
That doesn't mean, however, that non-profits are doomed to struggle with bottom-line woes. Far from it. Some of the most financially successful organisations in the world are in the non-profit sector, and it's not an accident that they got to where they are. What it took for them to do it was for their managers to engage in sound non-profit financial strategies that help to contain their operating costs, secure their funding sources, and get them connected with the right sponsors. For early-stage non-profit managers, here are the first four steps to take.
Establish Strong Internal Budget Controls
The first step on the road to non-profit financial stability is for management to institute strong internal processes and controls over where, how, and when money is spent. That's necessary for a variety of reasons. The first of them is the fact that non-profits are often subject to stricter audit requirements due to the nature of the tax-exempt status they enjoy at both the state and federal level. Failure to account for where money's being spent can threaten the very existence of the organisation. At the same time, non-profits are also answerable to their board of directors and their donors regarding their financial performance, so it's critical to make sure that the accounting fundamentals are covered from day one.
Failure to account for where money's being spent can threaten the very existence of the organisation.
Build Solid Corporate Partnerships
If you were to examine the finances of almost any well-established non-profit, the one thing you'd find that they have in common is the fact that they derive a significant percentage of their finances from a variety of corporate sponsors. The reason this is so is the fact that corporate funding (when it's available) tends to provide a more predictable funding stream than relying on event-based fundraising or individual donors. Since businesses need to manage their own budgets, they plan for expenditures well in advance and that gives the non-profit beneficiary the ability to create budget forecasts that run much closer to real-world results. Since predictability roughly equals stability, that makes developing corporate sponsorships one of the most important early-stage efforts that every non-profit should undertake.
Look for Hits-Based Early Funders
The classic catch-22 that young non-profits face is that they can't qualify for major grants or government funding sources because they lack the track record to prove themselves a responsible steward of those funds. And of course, without those funds, they can't build a track record. To overcome that early obstacle, non-profits have few viable paths to take. One is to find a wealthy individual to serve as a co-founder of the organisation and to rely on them for early-stage funding. The second is to look for philanthropic organisations that support hits-based giving.
It's a philosophy championed by organisations like The Open Philanthropy Project, who focus their giving on non-profits that pursue a high-risk, high-reward approach to the problems they hope to address. That means they're willing to provide funding to non-profit startups with no track record, provided they hold the promise of making a big impact if successful in their efforts. Today, hits-based giving can form the core of a non-profit's early financial strategy, so seeking out opportunities in this area is always advisable.
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Recruit Board Members with Financial Expertise
The final thing that non-profits should do to achieve and maintain financial stability is to try to recruit as many board members as possible that have financial experience in their professional backgrounds. This is something that many non-profits neglect to do at their own peril, often because they believe recruiting like-minded and cause-committed board members are more desirable. Although recruiting board members who share a passion for the work is necessary, it's just as necessary to bring in people with the right connections and experience to see the organisation through its early challenges. Since maintaining the non-profit's finances is a primary concern, so too should finding financially capable board members be early on.
A Strong Bottom Line
Any non-profit that works to put these four steps into practice early in its operation should find itself in a good financial position in very little time. Of course, how the organisation actually uses its resources is another matter entirely. If the cause is a good one, though, finding dedicated, intelligent people to put those resources to good use shouldn't pose any significant problems. With the right foundation in place, there's no limit to how much good a non-profit can do – and they'll enjoy years of financially-sound operation while doing it.
There are no right or wrong choices, but there are some that are more helpful than others. Take the time to figure out exactly what you want your investor to be like, take the necessary steps to prepare, and then approach your goals with intent and purpose that go beyond the pursuit of financial backing.
To discuss the two main avenues of securing investment for an SME, we’ve taken a look at the operations of Buxeros Capital, a public and private social impact investment fund, and used its methods of securing investment for up and coming start-ups in the emerging markets landscape as an example of good practice in finding the right investor for you.
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Private Equity Funds
Private equity funds are investment firms that operate outside of the public stock exchange and arrange transaction-based investments on behalf of investors and private firms looking for investment. They are the gateway to securing longer-term more cash heavy individual investors that are willing to take a risk with your business and deliver cash on the back of a promise that they will see returns within a certain time frame.
Buxeros is a both public and private equity fund that does this, however in order to approach a more niche investment sphere, it secures funding for small to medium enterprises that specifically aim to have a positive impact on local economies within emerging markets. The Buxeros team, like other private equity firms you might find, includes private equity veterans, seasoned entrepreneurs and strong partners in each region across the globe. One of its largest partners is Ramphastos Investments, an investment firm owned by Marcel Boekhoorn. This means that combined with its partners, Buxeros has the professional expertise, contacts and know-how you will need to not only secure investment but secure the right investment.
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One recent investment deal that Buxeros struck was with Profort, a business that provides orthopaedic care for people who need prosthetics or other low-cost limb treatment in Colombia and neighbouring developing countries. The firm is set to launch its first branch in Tunja this year and has secured the funds necessary to expand into other decentralised areas that will need and benefit from their services. Without an investment fund to help Profort reach the correct local contacts and without the specificity of Buxeros’ client remit to have a positive impact on local economies, this may have not been possible, which goes to emphasize how necessary it is to find investors that make sense and can help you with more than just the money.
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Government Backing
Buxeros Capital was established in 2016 and has since operated in conjunction with the Dutch Good Growth Fund (DGGF), a government backed project form the Ministry of Foreign Affairs which aims to match each investment Buxeros secures for small to medium enterprises in emerging markets.
Numerous governments around the world have similar initiatives and have capital dedicated to investment, particularly in emerging markets and developing countries. In this case, the DGGF provides half of the investment funds Buxeros’ aims to secure for its client. However, it won’t always be necessary for a government backed investment project to be conjoined with a private equity fund in order to secure the government’s investment, so have a dig and find out what your local government offers and how you can make the most of this.
A firm that has truly benefitted from the backing of the DGGF, alongside Buxeros’ input, is Blue 21, a Dutch enterprise focused on the research and development of floating architecture and urban development, particularly in areas affected by rising tides and where living on the waters is central to the locality’s lifestyle. By working alongside the Dutch government, and with the local authorities being corporately invested in the venture, the combination of expertise, cooperation and unified drive holds great promise for success and in this case has provided great confidence in delivering results that have positively affected Dutch localities on the waters.
Blue 21's floating homes
Having a combination of government backing and a private equity firm like Buxeros behind their venture has been incredibly useful, not just because they have the funds to move forward, but because they are now within arm’s reach of new opportunities and the prospect of expanding into more developing nations and making a difference in more and more places that need their help.
Karina Czapiewska, expert developer at Blue 21, put it like this: “The products that Blue21 develops are very complex; a floating building, district, town or even a city. Therefore, each product that is being developed cannot exist without a location, which in turn must consider the local context, local rules and regulations and often even the lack of context, rules or regulations that still need to be created along the way.
“To arrange this, a strong collaboration with the local authorities is needed. These collaborations start at a very early stage and it can often take a long time before anything is developed at all. Buxeros has a large network and plenty of experience in several parts of the world, and they have proven to be crucial in finding the right contacts, the right network and the right funding.”
"Each product that is being developed cannot exist without a location, which in turn must consider the local context, local rules and regulations and often even the lack of context, rules or regulations that still need to be created along the way."
Conclusion
In terms of expertise, cashflow, international rapports, know-how, contacts and support (all of the things you will need to grow and expand your business), finding the right combination of government help, whether it’s financial or not, and investor backing, whether it’s through a peer to peer arrangement or a private equity fund, will be ideal for your plans.
Securing investment is difficult and can take months if not years at a time, but if you have something you know will work, then find the people who will and more so, want to back you financially because they believe in it and because they too wish to see it succeed.
For Buxeros, the approach to securing investment for SMEs in emerging markets has meant that the firms looking to be funded got more bang for their buck. They set out to secure the necessary funds they needed to expand but walked away with the addition of investment partners that can connect them to the right people, government help and support from local authorities, as well as a partner that is 100% intent on seeing the positive impact of their venture succeed.
Corné Melissen (Director of Buxeros Capital)
According to Ian Borman, partner at Winston & Strawn this has meant that, for businesses that aren’t well-known or well-placed, or perhaps under significant stress, securing finance has become more challenging than ever.
Below Ian discusses with Finance Monthly the growth in family offices that have been resorting more and more to direct investment, touching on the complexities surrounding direct investment but also the social and ethical benefits smaller businesses can gain.
Direct investment by individuals and family offices is far from a new concept. Decades ago, my grandfather, a solicitor in the North of England, managed a portfolio of small loans to local businesses for a widow. But in the past several years, the needs of private businesses for capital and of family offices for returns have combined to accelerate this area of the finance market.
Historically, this activity has been focused on the SME sector, which itself has played a larger and more significant role in economic growth than one might think. For instance, in the UK small and medium-sized enterprises account for 99.3% of all private sector businesses and employ approximately 16.3 million people. In 2018, UK SMEs delivered a combined annual turnover of £2 trillion, accounting for 52% of all private sector turnover. Many SMEs are conservatively run, with low leverage.
This powerful economic engine is now at risk of stalling; government figures estimate that the number of SMEs in the UK fell by 27,000 between 2017 and 2018. Slowing growth, combined with the implications of the pound’s uncertain strength, are forcing many SMEs to restructure or invest in improved efficiency. In an earlier day, banks provided a ready source of capital to meet these and other needs, but many traditional financial institutions are still facing capital pressures and have withdrawn from large parts of this sector of the market, especially early stage businesses and turnarounds. Institutional investors, for their part, inevitably end up focusing on larger opportunities.
In an earlier day, banks provided a ready source of capital to meet these and other needs, but many traditional financial institutions are still facing capital pressures and have withdrawn from large parts of this sector of the market, especially early stage businesses and turnarounds.
Meanwhile, family offices have been facing their own challenges. Traditional family office investment strategies focused on public bond and equity markets, and to a lesser extent on hedge funds and real estate. However, these investments no longer provide the returns they once did. In the search for higher yield, more and more family offices are thus looking toward the opportunities presented by direct investment.
Indeed, some family offices have taken to the private market with considerable enthusiasm. Because they are independent and less heavily regulated than banks, family offices can be much more flexible in their consideration of investments across enterprise size, geographies and asset classes. As they move toward more direct forms of investment, some family offices are focusing on sectors such as financial technology, or strategies like turnaround. Those offices are increasing their ability to evaluate and manage targeted investments by hiring specialists from banks and private equity firms.
In some cases, family offices are clubbing together, either in an ongoing arrangement or on a deal-by-deal basis, to create a critical mass of investment capital to justify employing a team of people and to provide discipline in the investment decision-making process. (This professionalism in managing SME investments can be seen in other sectors in which family offices have increased their presence, such as investments in sports clubs and oversight of other family assets, such as yachts, aircraft and art.) Family offices are also reviewing and evaluating their organisation, governance structures and support for family members to ensure that offices can successfully navigate the complexities attached to investing directly in specialist markets.
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The attraction of direct investment to family offices comes from more than just an alignment of capital. Making direct investments also allows family offices to take the hands-on approach they increasingly favor in selecting and managing their portfolios. This hands-on approach allows family offices to more closely align their investment decisions with the values of the families they represent, making investments in the sustainability space and impact investing particularly attractive. Direct investment also gives family offices the opportunity to leverage their network and expertise to support regional growth.
Family offices have made a serious commitment to direct investments, allowing them to invest in an innovative, creative, and socially conscious way and providing welcome news for the SME sector and the wider economy.
It's best to look for other sources that can help you reach your business goals, so take a look below at some of the alternative methods of fundraising you can do.
Consider the Assistance from Angel Investors
These retired business gurus or successful entrepreneurs can be your ticket to salvation when you need funding. They are people who take a keen interest in your work and activities, making them huge supporters who want you to succeed and grow. Also, they can offer their advice and business expertise to make you a better player in the market.
Not your Average Loan
When people think about loans, they consider personal or business ones, but no one would ever expect to get funding from your inheritance money. Some owners have a lot of money coming in but the probate process gets delayed and drags. That's why loans for heirs can be very appealing when you want quick funding for your startup or company. You get a considerable amount of the money entitled to you, and you can pay the debt off when the courts finally issue your money.
Have You Thought About Crowdfunding?
This is a good way to utilize the digital world to your benefit. There are several reputable platforms with different investors that can provide you with the money you need if your business activities pique their interest. Countless investors are on the lookout for decent companies that offer something special and useful to the community, so investing in your company can be beneficial for them, too.
So, if you are looking for such crowdfunding, arrange a Meeting of investors and venture capitalists at a club. This will be really fruitful for you
You Could Go for Factoring and Invoice Advances
This can be very handy when you find a provider that can front you some money on the invoices that you’ve already billed out; it's good for companies that constantly provide products and services to customers, and you will pay it back once your customers have paid the bill in full. It's a simple method that keeps your business running and projects operating without waiting for long periods of time for consumers to pay up.
Consider CDFI Assistance When Nothing Else Works
This stands for Community Development Finance Institutes. They are private financial organizations that deliver affordable lending options, making it very easy and advantageous for many businesses that are in need of quick funding to save them from tight situations. Many businesses don't get a chance to thrive or grow because of restricted money-raising methods, so this can be the answer to their capital needs to fund their business.
Managing your finances can be a little tricky, but with the right mindset and the willingness to find better and reliable sources for funding, you can make a huge difference in your company's success. You can't just sit there and wait for your company to crumble; choose the right path for you and get the best funding that suits your needs and goals.
Many people are resorting to investments because they started to realize that living paycheck to paycheck just won’t cut it anymore. The problem with deciding to take that step is the fact that you’re going to need some money in the beginning, which isn’t always easy. Your best choice is usually trying to get a loan, but a few complications come with that option. Whether you’re trying to get a loan to start a business or to pay off your mortgage, bad credit history will always stand in your way. The question is, can you still get a loan in that case?
Can you get a loan with a bad credit history?
It’s possible, yes, though it’s definitely not easy. Having bad credit history doesn’t mean you’re a bad person. It’s a financial strait that many people find themselves in and it’s a tough jam to get out of. You need a loan to get out of that closed loop, and there are sources from which you can get one, even if you have bad credit history.
Friends or family
Yes, your first approach to getting a loan with your bad history is going to friends and family. It doesn’t always work, but if it does, you should definitely take advantage of this window because chances are your friends and family won’t charge you high interest rates, if they even did. You need to come up with a sound payment plan that ensures that they will get their money back in a period of time on which you’ll both agree. It’s very important that you make them trust that you’ll pay all the money back in a specific period of time, so they’d feel comfortable lending you the money you need to get out of your financial strait.
Loans
Now that the easy option is out of the way, is it possible to get a bank loan or one from a lender with your bad history? It isn’t easy, but it’s definitely possible. You’re going to have to do some things, though, to qualify for a loan. These are some tips and things you need to keep in mind because they might just get you that loan you desperately need.
1. Get acquainted with your finances
You can’t possibly hope to get a loan unless you know the ins and outs of your personal finances, down to the tiniest details. Get acquainted with your accounts, what’s in them and how the cash flow has been moving over the past few years. You can start doing that by checking your credit reports, which is a crucial first step because that’s how you start figuring out your credit score. If there are any special comments in your report, you should try reaching out to whoever put that remark to have them remove it before you apply for a loan –– because it does make a difference and comments like these will be taken into consideration by the lender.
It’s also very important that you learn your credit scores as well as your debt to income ratio, because that is how you can start figuring out a plan to improve your score history to get back on your feet successfully.
2. How you can improve your credit history
Now that you’re well acquainted with your credit history, it’s now time to start applying certain strategies to improve it. The first thing you have to pay attention to is the payment history. Yes, a lot of factors are taken into consideration in your overall score, but payment history is the most crucial and delicate one. So, you must make sure you pay the upcoming payments on time. Forget about what happened in the past, and focus on the future ones to ensure you never miss one.
Contrary to popular belief, closing old accounts is not always a good practice. Why? Because those old accounts that you’ve already paid off open can help increase your credit history length, and it could give you a lot more solid grounds to stand on when you’re applying for the new loan.
One thing you have to be careful about is your credit limit. It is always best that you keep the ratio between your debt and your credit limit reasonable. The less that ratio is, the better, naturally. This is important because it’s a very bad sign if that percentage is high, and it would show many lenders that you’re not very wise when it comes to your finances and it might sway them from giving you a loan.
Speaking of credit, you should never open new credit accounts unless you’re 100% certain you could take care of them and pay them off on time. Randomly and excessively opening credit accounts shows lenders that you’re not very responsible, or worse, it might make them think that you’re running a scam. This is why it’s very important that you keep this to a minimum, and only open new accounts in the case of emergencies, and if you’re absolutely sure you could handle them.
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3. Understand your options
After doing your best to improve your credit score, you next want to start looking for a suitable lender that can give you what you’re looking for. But there’s one more thing you need to do before taking that step, and that is understanding your options when it comes to loans. The two most common types are unsecured and secured loans.
Unsecured loans might be a bit problematic if you have a bad history, because they basically charge you a higher interest rate because of your situation –– and that is if you managed to obtain the loan in the first place. An unsecured loan is basically one that you don’t need collateral for. You can use them to cover emergencies or take care of another debt you found yourself in.
Secured loans, on the other hand, are protected by a collateral like home equity or any other assets. The good thing about this is the fact that they come with lower interest rates, but you do need to have a collateral to get a secured loan in the first place.
4. Find a co-signer
This is one of the best strategies that could help you land a loan. A co-signer is someone with a healthy credit score who would sign the loan with you, which will make your chances of getting it exponentially better, not to mention the fact that it’ll also probably land you a lower interest rate as well. Your chances are always better with a co-signer, and if you have someone willing to help you with that you should definitely get them to do it because it’ll make a lot of difference.
5. Find the right lender
Now that everything’s in order, you need to start looking for the right lender. This step will require a lot of research on your end, and it’s important that you be diligent with it because it makes all the difference in how this entire process will pan out. Don’t just go for the first loan that approves you; wait until you look at other options so you could have a clear picture.
You want to find a lender that would give you the personal loan you need for the lowest interest rate possible, and the best loan term. Each will have their own policies and evaluation process to determine just how much risk comes to lending you money, because loans for those with bad credit are associated with a risk factor for most lenders and they don’t hand them out like that. You need to keep all those points in mind because you might need the money urgently, for instance. So, do your homework and research the hell out of every possible lender you can find online, and you are going to find plenty.
Other options
There are other options that you can resort to if you want to get a loan with your bad history, but they might come with higher interest rates in some cases. For instance, in title loans, lenders rarely care about your bad credit, and you could easily use your vehicle as collateral to get some money, but it’s a short term loan and the interest rates are usually a bit higher. So, keep that in mind if you’re considering getting a title loan. Another good option for is credit unions, which particularly specialize in offering loans to people who have a bad credit history, and you can easily find local options to help you get out of your jam. The great thing about credit unions is the fact that they have an interest ceiling which applies to everyone –– 18%. That is a great percentage and it’s around half of what a bank would offer you for a similar loan with your bad history.
There are other options that you can resort to if you want to get a loan with your bad history, but they might come with higher interest rates in some cases.
What the cons of loans with bad credit are
1. Higher interest rate
You can get a loan even with your bad history, but you’re going to have to pay higher interest rates than usual because of your special situation. Banks and lenders usually take advantage of your need for money –– and to be honest, they’re trying to be on the safe side, considering your bad history and the fact that you’re at risk –– so they impose higher interest rates, which means you’ll pay a lot of money in the long run. You need to keep that in mind before applying for a loan with bad history so you don’t get surprised when it does get approved.
2. They take time
Some of these loans with bad history could take quite some time to get processed, a bit longer than your average loan. Sometimes it’s because they’re double checking your history and thoroughly going through your finances or any other details, but it might not be the best option for you in case of emergencies.
3. Penalties
You have to make sure you’ve read every detail of your agreement with the lender, because sometimes there are extra fees or penalties that you might be subject to without even knowing it. Ask if there is a loan origination fee or any other hidden fees, and whether or not they have penalties for being late and just how much those penalties are. There are even some lenders that impose a penalty if your payments are made by check! So, it’s important to carefully check those details because the last thing you want in your situation is to pay any extra money that you can’t afford to spare.
4. The risk involved
You might get asked to include a collateral in the agreement like your car or house, which is a bit risky because if you failed to pay your installments, you might lose the car or the house.
5. Plenty of shady lenders
You might come across quite a few shady lenders here and there, which is something you need to be really careful about. Some are not licensed and don’t have approval to offer that kind of service, so make sure that you’re dealing with a licensed lender in your state before you pay any money so you don’t end up being scammed.
6. The temptation of short-term loans
Most short-term loans with your bad history can be too much to resist sometimes. Title loans, paydays, and all the likes might seem very tempting, but they come with a lot of baggage. Their interest rates are higher and they cost you more money in the long run, so that’s definitely something you should keep in mind.
As shown in this article, it is possible to get a loan with bad history. Is it perfect? Definitely not, but neither is your situation. You’ll have to compromise either way to get out of the mess you’re in, but remember to be patient and wait until you get several other offers so you could compare between them and choose the most suitable one for you.
Below, Michael delves into business loans and the most important things you need to be mindful of when applying for one.
When you make the decision to apply for a business loan, the first thing you will notice is the vast amount of choice available to you. This can be extremely confusing if you are not sure what type of loan is suitable for you and your business. Thankfully internet comparison sites can offer a fast and simple process to compare loans and match them to your specific criteria.
Before you begin you must decide:
- What is the purpose of the loan?
- The amount you would like to borrow.
- The period of time you can comfortably pay it back.
- What annual percentage rate (APR) are you comfortable with?
- That you have taken into account any additional fees.
Once you have nailed down these specifics, it is time to start looking.
Reputation
Taking out a loan is a big commitment. Make sure you are borrowing from a reputable lender. A background check is a good way to start. You can typically find customer reviews online that should help inform your decision. Obviously, the best and most efficient method is to use a respected online comparison site to ensure the hard work is done for you.
Clear and simple language
Applying for a loan is daunting enough given the huge number of lenders offering finance at different rates. Then you have to make sure you pick an appropriate payment schedule. Once this is all done, then you will have to check the terms and conditions to make sure you haven’t overlooked something that might come back to haunt you. It is the duty of a loan provider to make sure the information you receive is clear and accessible. If you don’t understand something, make sure you ask for clarification.
Trouble-free payment
Different loan providers offer different payment schedules and lending terms. Traditional loans are paid over a set period of time on a daily, weekly or monthly basis. However, there are now a variety of lending options that are more tailored to the specific needs of borrowers. Merchant cash advances, for example, are calculated as a percentage of a business’s daily card taking and automatically repaid. Invoice finance is another form of lending that can quickly increase business cash flow. A lender can pay you a percentage of the value of your business’ invoices upfront, in return for a cut of their worth.
Hidden charges
Look out for hidden charges such as early, late payment or even processing fees. If you are not careful these can substantially add to the cost of your loan repayments. If a fee was not explained to you by your lender, make sure you contact them to challenge the charges via the Consumer Rights Act. This legislation protects your rights and makes it easier to contest hidden fees and charges. If this fails you can always seek redress with the Financial Ombudsman Service (FOS).
To find out more, visit: https://www.quotegoat.com/business-finance/
But what exactly are MCAs? And what are the pros and cons for business owners looking for a quick cash fix when facing cash flow difficulties? Michael Foote, Managing Director at Quote Goat, answers these questions below.
MCAs explained
Merchant or Business Cash Advances are advance payments made to a business in exchange for an agreed percentage of future sales through credit or debit cards.
More suited to businesses that take a reasonable proportion of their income through credit or debit cards, a Merchant or Business Cash Advance is considered a short-term, unsecured business loan based on future sales.
In agreeing to a Merchant or Business Cash Advance, a business effectively sells a proportion of their future sales or income in order to receive a large cash sum to aid increased cashflow.
A Merchant or Business Cash Advance is considered a short-term, unsecured business loan based on future sales.
Pros
Compared to conventional business bank loans, Merchant Cash Advances come with a host of benefits to businesses in need of additional cash:
High approval rate: Merchant Cash Advances have a typically high approval rate when compared to traditional bank loans, meaning younger businesses who often struggle with cash flow are more likely to benefit as a result.
Speedy cash injection: Once a loan has been approved, Merchant Cash Advances have a quick turnaround, where businesses are normally in receipt of their requested cash injection within 24 hours.
No interest rates or APR: Compared to conventional bank loans or other means of business funding, Merchant Cash Advances have zero interest rates, providing a more manageable loan option for both small businesses and start-ups.
No fixed payment amounts: Unlike other business loans, Merchant Cash Advances operate on an agreed percentage as opposed to a fixed payment, where the business in receipt of the loan pays a daily percentage on the sales received. This means that during quieter sales periods, the business does not struggle with the return of high loan payments.
Cons
Shorter payment terms: The payment terms offered through a Merchant Cash Advance tends to be shorter than conventional business loans. Therefore, it is important for the recipient to be as accurate as possible when forecasting future sales to ensure the loan can be repaid in full within the given timeframe.
Not suitable for all businesses: If your business does not receive payments through either debit or credit card, or only a small percentage of sales are received through cards, then it is unlikely that you will be able to receive a sizeable loan amount compared to alternative options.
To find out more, visit: https://www.quotegoat.com/business-finance/merchant-cash-advances/
