Other Finance
Outside of equity, loans and grants, the following sources of finance should be considered -
Overdraft - a facility to borrow up to a prescribed amount for a defined period (usually one year renewable). Typically charged at 0.5-3.0% above base plus an arrangement fee (usually 1%). Remember that all charges are negotiable. Repayable on demand. Amount of facility will normally be based on the level of debtors, and the bank will take a security over current assets (debtors and stock).
Factoring or Invoice Discounting - a factoring agent, usually a bank subsidiary, pays a company up to 85% of the invoice value when the invoice is originated i.e. when the goods or services are delivered by the company. The balance is paid, less fees, when the customer settles the invoice. The overall cost is normally a few per cent more than an overdraft. With factoring, the bank itself normally collects the money, whereas with Invoice Discounting the company collects, and deals with credit control, as before, and may therefore be preferable in terms of customer relations. Invoice Discounting is also cheaper.
Leasing, HP, contract purchase - all forms of loan where the security given is over the asset purchased. Look around for the best deal, and be aware of tax and VAT consequences of different facilities.