Information a statutory demand should contain

In this guide:

  • What is a statutory demand

    What a statutory demand is and how long it can last

    If a creditor is owed money, they can issue a statutory demand. A statutory demand is a formal written request that a debt must be paid.

    An individual or business that receives a statutory demand has 21 days to:

    • settle the debt
    • secure the debt - reach an agreement for payment

    If you are an individual and you have been served with a statutory demand, you can ask the High Court to 'set aside' (dismiss) the demand. If you wish to do this, your application to the Court to have the demand set aside must be made within 18 days from the date on which the statutory demand was served on you. In the case of a company, an injunction can be sought to restrain the creditor from petitioning for winding up or appointing an administrator. 

    If the debt is not paid the creditor can: 

    • in the case of personal debts, including debts incurred as a sole trader or when trading in partnership with someone else, present a petition to the High Court for a bankruptcy order if the debt is for over £5,000 
    • in the case of company debts, present a petition to the Court for a winding-up order, if the debt  is for over £750

    To find out how to serve a statutory demand see serving a statutory demand.

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  • Serving a statutory demand

    How to serve a statutory demand depending on who you are serving it on

    How you serve a demand varies according to who you are serving it on - whether an individual or a company.

    Individual or sole trader

    If an individual or a sole trader owes you money, you must do everything you can to bring the statutory demand to the attention of the person concerned and, if possible, serve it personally.

    You can employ a process server to do this for you - a process server serves court and legal documents on behalf of:

    • solicitors
    • lawyers
    • local authorities
    • government agencies
    • companies
    • private individuals

    Registered limited company

    If a registered limited company owes you money, you can serve a statutory demand by delivering it to the company's registered office. If you cannot do this, you can send one by registered post. The demand will be properly served if the company acknowledges it by signing the Post Office receipt.

    Unregistered limited company

    If an unregistered limited company owes you money, you may serve the statutory demand by:

    • leaving it at the company's main place of business
    • delivering it to the company secretary, manager or principal officer of the company
    • serving it in a way directed or approved by the court
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  • Information a statutory demand should contain

    The required contents of a statutory demand, and the forms you need to use

    A statutory demand must explain to the debtor:

    • the purpose of the demand
    • what will happen if they fail to comply within the 21-day time limit
    • the time and manner in which the demand must be complied with
    • if the debtor is an individual, their right to apply to the High Court to have the statutory demand set aside (dismissed)

    The demand must also include the contact details of a named individual with whom the debtor can communicate regarding the debt.

    You - or someone authorised to sign on your behalf - must sign and date the demand. It must state:

    • the amount of the debt and the consideration for it - if there was no consideration, then it must detail the way in which the debt arose
    • if the debtor is an individual
      • whether the debt is payable immediately or at a future date
      • details of the unsatisfied judgment or - if none - the basis for the creditor's belief that the debtor appears to have no reasonable prospect of being able to pay

    What forms should I use to issue a statutory demand?

    To issue a statutory demand, you must complete the relevant form. The forms vary according to who you're serving the demand on and the circumstances surrounding the debt.

    If you're serving a demand on an individual, including a sole trader, you need to use the appropriate forms. The Department for the Economy (DfE) provides statutory forms that you can download, including:

    Form 4.01 should be used in the case of a debt due from a registered or unregistered company.  

    If you own a business that has been served a statutory demand, see what to do if you are served with a statutory demand.

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  • Proof of serving a statutory demand

    When you need to prove you have served a statutory demand, and when you may need a statement of truth

    If the debtor does not pay the statutory demand and you intend to carry on with debt-recovery proceedings, you will need to prove you have served the demand. One option is to employ a process server. A process server serves court and legal documents on behalf of:

    • solicitors
    • lawyers
    • local authorities
    • government agencies
    • companies
    • private individuals

    If you're intending to present a petition for a bankruptcy order based on a statutory demand, the total debt must be more than £5,000. If you're intending to present a petition for a winding-up order based on a statutory demand, the total debt must be more than £750. However, a number of creditors for smaller amounts can put their claims together to reach this minimum.

    You can ask the High Court to make a bankruptcy order or winding-up order:

    • if the debtor does not settle the debt or reach an agreement for payment within 21 days from the date of service of the statutory demand, or 
    • if the debtor is an individual, they do not ask the Court to set aside (dismiss) the demand within 18 days from the date of service of the statutory demand, or 
    • if the debtor is a company, an injunction is not sought to prevent the company being wound up or placed in administration
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  • What to do if you are served with a statutory demand

    Your options if you receive a statutory demand, and the grounds for a demand to be dismissed

    You should never ignore a statutory demand. If you are an individual and the debt is for £5,000 or more, it could lead to you being made bankrupt. If you own a company and the debt is for £750 or more it could lead to your company being wound up by the High Court.

    To avoid this, you must comply with the statutory demand within 21 days. You can either settle the debt or secure it by reaching an agreement for payment. If you dispute it, you should take action to stop the creditor presenting a bankruptcy or winding-up petition.

    Disagreeing with a statutory demand

    If you are an individual you have 18 days from when the statutory demand is served on you to apply to the High Court for the statutory demand to be set aside - dismissed or cancelled. If the debt is owed by a company you own you should seek legal advice about obtaining an injunction to prevent the company being wound up or placed in administration at the earliest opportunity. 

    Application to set aside a statutory demand

    If you want to apply to set aside a statutory demand, and the debt is owed by you personally and not by a company you must apply to the High Court using form 6.04 and form 6.05. The application must be accompanied by four copies. The Department for the Economy (DfE) provides links to all insolvency and bankruptcy forms.

    From the time you file the application to set aside the statutory demand the deadline for you to comply with it stops running.

    Provided an application to set aside the statutory demand is not dismissed immediately, the Court will fix a time for hearing the application, enter this each of the four copies of the application and seal and return them to you. You must then give at least seven days' notice of the hearing to:

    • the creditor
    • whoever is named in the statutory demand as the person with whom the debtor may enter into communication

    by sending them a sealed copy of the application. 

    Setting aside a statutory demand (if you owe the debt as an individual)

    The High Court has various grounds for setting aside a statutory demand - it may grant an application for setting aside if:

    • the debtor appears to have a counter-claim, set-off or cross demand equal to or greater than the debt they owe
    • the debt is disputed on grounds the Court considers to be substantial
    • it appears that the creditor has not disclosed some security or the Court is satisfied that the value of the security is greater than or equal to the amount claimed
    • the Court is satisfied on other grounds that the demand ought to be set aside

    If the High Court dismisses your application, the deadline for you to pay or secure the debt will restart from the day your application is dismissed. The Court will make an order authorising the creditor to present a bankruptcy petition either forthwith or from a specified date and you must send a copy of this order to the creditor who served the statutory demand on you. 

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How to find business angel networks

In this guide:

  • Purpose of business angels

    How business angels operate and how they choose the businesses they invest in.

    Business angel (BA) investment is a form of venture capital funding where private individuals invest in companies in exchange for a share of their equity. Most BAs invest between £10,000 and £500,000.

    How BAs invest

    BAs invest in start-ups or young businesses needing to fund activities such as product development or market expansion.

    Many investments offer potentially high returns but also involve high risks. A BA investment can often result in the total loss of the amount invested, while other investments may provide a 10x + return depending on the success of the business.

    This has led to the introduction of the Enterprise Investment Scheme (EIS) and the Seed Enterprise Investment Scheme (SEIS). EIS and SEIS are the two best tax schemes for investors in the world and they can dramatically reduce the risk involved for BAs.

    BAs can make investment decisions quickly but will still need to see that you have a good business plan before they commit. Many specialise in particular industries, making them a potentially valuable source of expert knowledge and even mentoring.

    Government match funding

    The government provides some funds to match BA investments, such as those provided in Northern Ireland by techstart NI and Co-Fund NI ll.

    • techstart NI provide funding support for entrepreneurs, seed and early stage SMEs and university spin-outs
    • Co-Fund NI  have an equity fund that co-invests alongside business angels and other private investors

    The Angel Co Fund operates on a similar basis to Co-Fund NI, where it will allow angels to complete a funding round. 

    Finding a business angel

    BAs may not make investments regularly and it could take you several months to find a suitable investor.

    You can look for a BA through networks such as UK Business Angels Association (UKBAA), Halo Business Angel Network (HBAN) and European Business Angels Network (EBAN).

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  • Advantages and disadvantages of business angel funding

    Investment from a business angel could help your business but it’s also important to consider any disadvantages of using an angel investor.

    Before approaching a business angel (BA) for investment, you should consider whether other forms of finance could better meet your organisation's needs. For other sources of alternative funding, see equity finance.

    Advantages of business angel financing

    Six advantages of business angel investors:

    • BAs are free to make investment decisions quickly
    • no need for collateral ie personal assets
    • access to your investor's sector knowledge and contacts
    • better discipline due to outside scrutiny
    • access to BA mentoring or management skills
    • no repayments or interest

    Disadvantages of business angel financing

    Four disadvantages of business angel investors:

    • not suitable for investments below £10,000 or more than £500,000
    • takes longer to find a suitable angel investor
    • giving up a share of your business
    • less structural support available from a BA than from an investing company

    Venture capital funding

    Venture capital companies make larger investments than BAs making them suitable for bigger companies with more complex plans.

    The mindset of a VC is different to that of a BA. A VC is representing limited partners such as bank, insurance and pension funds and need to be aggressive in order to produce the best returns so they can raise their next fund.

    They are likely to have a more formal relationship with the businesses they invest in and to build exit procedures into agreements. Due diligence for venture capital investments can also be more expensive for your business and take longer than with BA deal - see venture capital.

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  • How to secure business angel investment

    Preparing your business to apply for business angel funding.

    Before you apply for business angel (BA) investment, you should make a shortlist of potential investors you feel would be a good match with your company.

    Making your business investment ready

    Your business should be investment ready before you apply for funding. This means preparing a thoroughly researched business case, including a realistic valuation of your company's worth.

    You should provide:

    • audited accounts for the past two years
    • evidence of current performance
    • profit-and-loss forecast for next year
    • business bank statements for the past six months
    • profiles of each partner or director in your business

    Pitching to business angels

    Business angels are more likely to be interested in your proposal if they:

    • understand the product or service
    • have worked in the same industry
    • are confident your business is well managed
    • feel they can bring added value to your business
    • are not being asked for a huge investment, or repeated investments

    When pitching your business plan to a BA you should cover:

    • the benefits they would gain by investing
    • details of the investment required
    • terms of the proposed deal - eg share of control, skills you offer and timescale of investment
    • the ability of your management team to implement the plan

    Read more on how to prepare your pitch to secure finance.

    Finalising the BA investment deal

    It can take several months to finalise BA deals legally and for funds to be transferred. You should also allow for additional finance to cover legal fees and bank charges.

    Legal elements of BA deals include:

    • shareholders' agreement - relationship between the shareholders
    • subscription or investment agreement - terms of the share subscription
    • service agreement - eg employment contracts with managers or directors
    • other contracts - with more junior employees, suppliers, or customers
    • disclosure letter - details of any warranties or assurances agreed between the parties
    • memorandum - list of company's powers and the amount of share capital
    • articles of association - company's internal regulations
    • share options - eg giving tax-advantaged share options to new or existing employees under the government's Enterprise Management Incentive (EMI) scheme

    For more information see secure equity investment.

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  • How to find business angel networks

    Finding a business angel investor using a business angel network.

    You can find individual business angel (BA) investors, or syndicates, through BA networks in the UK and Europe. 

    BA networks include:

    • Halo Business Angel Network (HBAN)
    • UK Business Angels Association (UKBAA)
    • European Business Angel Network (EBAN)

    BA networks help companies find an investor who is right for their funding needs. They also give investors details of companies they might want to invest in.

    HBAN

    HBAN is the all island representative body for business angels on the island of Ireland with a specific remit to establish business angel syndicates.

    In addition to regional and sectoral syndicates, the network supports a number of all island vertical syndicates in the food and med tech space and hence companies in Northern Ireland can apply to pitch for funding to these networks.

    Through HBAN 2.0, there is now a focus on the leverage of cutting-edge technology and end-to-end digitisation to streamline the investment process for angels and start-ups. Read more on HBAN 2.0.

    Find out more about HBAN's work throughout Ireland.

    UKBAA

    The UKBAA is a trade association for BA investors, promoting early stage investment in UK companies by bringing together investors and companies looking for funding.

    BAs, venture capital networks, and associate organisations such as solicitors and accountants pay membership fees to join the BBAA but the service is free for companies seeking investment.

    Find out more about sourcing a BA investor with UKBAA.

    EBAN

    EBAN is the European Trade Association for BA investment and seed funds. The organisation comprises over 250 BA networks and around 20,000 individual investors.

    The organisation offers membership packages to individual BAs, BA networks and other associated organisations.

    Find out about EBAN BA investment networks.

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  • Business angels

    Using business angel investment to grow our business - Pitchbooking

    How Pitchbooking has successfully grown through business angel investment.

    Pitchbooking is an online system that aims to simplify the process for customers booking sports facilities, and for organisations managing the amenities and booking process. The platform is used by over 1,000 sports facilities in over 100 locations across the UK.

    Founded by childhood friends, Fearghal Campbell, Chris McCann and Shea O'Hagan, the idea came out of a need to solve their problem. Booking and paying for a casual game of 5-a side football in their hometown of Lurgan was a bigger ordeal than it should have been. 

    Pitchbooking allows customers to browse the availability of facilities and book spaces online while aiming to eliminate the administrative burden for sport facilities managers by giving them the tools to manage bookings and payments.

    Fearghal explains how the company has grown through business angel investment.

    Starting the business

    "We have always been amazed at how much money is spent on building and maintaining sports facilities in the UK and Ireland, but the processes for booking and paying to use them are so time-consuming. So, we created Pitchbooking to solve this problem."

    "In the initial stages, as a fledgling tech company, Invest NI was a source of financial and advisory support in helping us to establish the business."

    Decide on the help you need and connect with investors

    "We had a strong vision of what our product could do for sports facilities across the country, and an aggressive plan of how quickly we could get there. Approximately nine months following our product launch, and with positive feedback from our customers, we decided that business angel investment was needed to realise this growth."

    "We were able to get in touch with potential investors through introductions from connections - reaching out to the local networks and even some cold emailing and LinkedIn approaches to angels, who we believed would be suitable for us."

    "We found that warm introductions were superior to cold outreach. The chance of a reply multiplies when you have someone to make an introduction for you. Putting in the time to find a mutual connection, and asking them to make the introduction, is well worth the effort."

    Prepare your business for investment

    "We are a software as well as a service business, so understanding our cost to acquire a new paying customer plus their life-time value to us was important to potential investors. I believe the fact that we were so diligent and well prepared with our numbers impressed our investors."

    "When we presented to potential investors, we explained why the challenge we aimed to address was such a significant issue, and why we are the team to solve it. We highlighted how lucrative it would be to the company that gets it right. We also covered our product and customer traction."

    "It takes longer than you would think to finalise a deal, months not days, and this appears to be the consensus with our peer group too."

    Capitalise on the investment and support you receive

    "Officially, we speak with our investors quarterly, but we will turn to them when we need advice on a challenge or an opportunity. Our investors are varied in their experience - some are from the world of tech start-ups, others have a background in sports facility management. So we turn to the individual we think can give the best input on the particular situation."

    "We would not have had the financial or advisory backing to grow without our team of investors. In simple terms, we would not have been able to capitalise on key business opportunities without investor backing."

    Communicate effectively

    "It's important to remember to keep your investors updated regularly on how the company is progressing. It's often one of the first tasks that slide off the to-do list when things get busy, but they are a part of your company and are there to help."

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Where to look for a bank loan

In this guide:

  • Types of bank finance for businesses

    Sources of short- and long-term bank finance for businesses, including overdrafts, bridging finance and mortgages.

    There are several types of bank finance available to your business, with different packages available to suit your needs as your business requirements change. The type of finance that would best suit your business may be based on the purpose of the finance, how quickly you need finance, and how quickly you could repay it.

    Short-term finance

    Overdrafts are used in conjunction with business bank accounts and are a flexible source of working capital for short-term needs.

    Bridging finance is provided by the bank to businesses to maintain cashflow while awaiting funds from grant cheques, drawdown of commercial mortgages or loan agreements, or other confirmed sources of future income.

    Working capital funding

    Invoice finance offers ways to access working capital by unlocking the value of invoices, although interest rates and charges apply on the cash advanced. Invoice discounting allows you to draw on funding secured against approved invoices, while in factoring you can sell invoices to your financier. If your buyer introduces a supplier finance scheme (also known as supply chain finance or reverse factoring), this will provide the same benefits at a potentially much lower cost.

    See factoring and invoice discounting.

    Medium-term finance

    Term loans have a fixed or variable interest rate and mature over a one- to seven-year period. They are typically used to buy fixed assets such as property or machinery or other purchases of a capital nature. 

    Asset finance and leasing options allow businesses to spread the ownership associated with buying assets. When you buy assets through leasing finance, the leasing bank buys the equipment for you to use, in exchange for regular payments. Leasing or hire purchase can help you maintain cashflow and allow greater flexibility in upgrading equipment.

    For more information, see decide whether to lease or buy assets.

    Long-term finance

    Commercial mortgages are provided by banks to finance the purchase of business premises. Types of mortgage available include repayment, commercial endowment or pension. The mortgage will usually be repayable over a 15-year period.

    You can get advice on the best providers of commercial mortgages from your bank's business adviser or a commercial mortgage broker. For more information, see commercial mortgages and lenders.

    Fixed asset loans are loans for assets that cannot easily be turned into cash - eg property, plant or machinery. The loans can be fixed for up to ten years. With this type of loan, the asset itself is the collateral and can be repossessed if you do not maintain repayments. 

    Banks may also provide a range of specialist services to fund expansions, mergers or acquisitions. For more information, see raise long-term funding through debt capital markets.

    However, there may be situations when you are unable to obtain finance from a bank. If this is the case, there are other finance options available to you - see non-bank finance.

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  • Is your business ready for bank financing?

    Even before seeking finance, you need to be clear in your own mind about why you need it, and how much.

    When you seek finance for your business, you will give yourself the best possible chance of success if you are clear about your business' requirements. Consider the following:

    1. Why do you need business funding?

    It may be to finance business expansion, to develop or exploit new products, for new premises or a number of other reasons. It should be for something specific, and be carefully costed. Banks will want to know the business case before they agree to supply funding, so you should think about the reasoning, the potential outcomes of the investment and how you will repay the finance.

    2. How much funding do you need and when will you need it?

    Although it does not make business sense to borrow more than you need, you should be careful not to underestimate - aim for the optimum amount. You should also consider whether you need all of the money at once, or whether staged amounts would work, as this may reduce the cost of borrowing with lower interest costs and initial repayments.

    3. How are you going to repay the borrowing?

    You will need to repay the loan in the future, with interest. Ask yourself when you are likely to start seeing a return on your investment, and how much the monthly repayments will affect your cashflow.

    4. What is the right source of finance for you?

    There are several different types of investment finance, and you will stand a much greater chance of securing financing if you can clearly explain why the source you are approaching is most appropriate for you, and any potential drawbacks.

    For more information, see types of bank finance for businesses.

    5. Is there anything that would impact your chance to borrow?

    There are some things which will weigh against an application for loans or other funding:

    • unauthorised overdrafts
    • missed loan repayments
    • County Court judgements against the business or its directors
    • adverse credit rating data, against the business or its directors

    There are also some factors which would automatically disqualify a potential borrower. These include:

    • a history of illegal activity on the part of the business or individual
    • if the business is in administration, or the individual has bankruptcy proceedings in process against them
    • where the potential borrower is under the age of 18
    • when the business could pose a risk to the reputation of the bank

    Bank finance may not be the best option for your business and there are a number of alternatives available to you - see business financing options - an overview.

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  • Advantages and disadvantages of bank loans

    What loans are, their advantages and disadvantages, and how to know when they are suitable for your business' needs.

    A loan is an amount of money borrowed for a set period within an agreed repayment schedule. The repayment amount will depend on the size and duration of the loan and the rate of interest.

    Loans are generally most suitable for:

    • paying for assets eg vehicles and computers
    • start-up capital
    • instances where the amount of money you need is not going to change

    The terms and price of loans will vary between providers and will reflect the risk and cost to the bank in providing the finance. For larger sums, the pricing and terms may be negotiable.

    Banks will loan money to businesses on the basis of an adequate return for their investment, to reflect the risks of defaulting and to cover administrative costs. If you have an established relationship with your bank, they will have developed a good understanding of your business. This will help them to advise you about the best product for your financial needs.

    Different types of bank loan include:

    • working capital loans - for short notice or emergency situations
    • fixed asset loans - for buying assets where the asset itself is collateral
    • factoring loans - loans based on money owed to your business by customers
    • hire purchase loans - for long-term purchase of assets such as vehicles or machinery

    Advantages of term loans

    • The loan is not repayable on demand and so available for the term of the loan - generally three to ten years - unless you breach the loan conditions.
    • Loans can be tied to the lifetime of the equipment or other assets you're borrowing the money to pay for.
    • At the beginning of the term of the loan you may be able to negotiate a repayment holiday, meaning that you only pay interest for a certain amount of time while repayments on the capital are frozen.
    • While you must pay interest on your loan, you do not have to give the lender a percentage of your profits or a share in your company.
    • Interest rates may be fixed for the term so you will know the level of repayments throughout the life of the loan.
    • There may be an arrangement fee that is paid at the start of the loan but not throughout its life. If it is an on-demand loan, an annual renewal fee may be payable.

    Disadvantages of loans

    • Larger loans will have certain terms and conditions or covenants that you must adhere to, such as the provision of quarterly management information.
    • Loans are not very flexible - you could be paying interest on funds you're not using.
    • You could have trouble making monthly repayments if your customers don't pay you promptly, causing cashflow problems.
    • In some cases, loans are secured against the assets of the business or your personal possessions, eg your home. The interest rates for secured loans may be lower than for unsecured ones, but your assets or home could be at risk if you cannot make the repayments.
    • There may be a charge if you want to repay the loan before the end of the loan term, particularly if the interest rate on the loan is fixed.

    When loans are not suitable

    It is not a good idea to take out a loan for ongoing expenses, as it may be difficult to keep up repayments. Ongoing expenses are instead best funded from cash received from sales, possibly with an overdraft as backup. 

    If you cannot obtain a loan or other type of finance from your bank, there are other finance options available to you. For more information, see business financing options - an overview.

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  • Advantages and disadvantages of overdrafts

    The flexibility, advantages, drawbacks and costs of using an overdraft facility.

    An overdraft is a borrowing facility attached to your bank account, set at an agreed limit. It can be drawn on at any time and is most useful for your day-to-day expenses as it can help you to manage your cashflow more flexibly.

    It is worth noting that loans are probably more appropriate for long-term funding. An overdraft is likely to cost more than a loan for a long-term purchase.

    Advantages of an overdraft

    • An overdraft is flexible - you only borrow what you need at the time which may make it cheaper than a loan.
    • It's quick to arrange.
    • There is not normally a charge for paying off the overdraft earlier than expected.

    Disadvantages of an overdraft

    • If you have to extend your overdraft, you usually have to pay an arrangement fee.
    • Your bank could charge you if you exceed your overdraft limit without authorisation.
    • The bank has the right to ask for repayment of your overdraft amount at any time, although this is unlikely to happen unless you get into financial difficulties.
    • Overdrafts may be secured against business assets.
    • Unlike loans you can only get an overdraft from the bank where you maintain your current account. In order to get an overdraft elsewhere you need to transfer your business bank account.
    • The interest rate applied is nearly always variable, making it difficult to accurately calculate your borrowing costs.
    • Unutilised overdraft facilities may be reduced by the banks at short notice, although this is unlikely to happen unless you get into financial difficulties.

    Bear in mind that what starts out as a good deal may change - as may your business needs. It's worth reviewing your options regularly.

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  • What you need when applying for a bank loan

    Banks have a number of core criteria which they will take into account in assessing your finance application.

    Before you look for a financial provider, you should ensure that your business is able to meet the requirements of potential lenders and secure a deal that will benefit your business.

    One way to make sure your business is prepared is to ensure your business plan is up to date, and that you are well informed about your own finances. For example, you should be able to discuss:

    • your audited accounts for the past two years
    • evidence of your current performance
    • a profit-and-loss forecast for next year
    • business bank statements for the past six months
    • profiles of each partner or director in your business

    You will also need to be clear about the amount of money you require and what it will be used for.

    For more information, see cashflow management.

    It is also important that your business and personal credit ratings are up to date and as free from errors as possible. You can improve your credit rating by ensuring that you:

    • pay your suppliers regularly
    • capitalise the business by investing your own funds, in the form of loans fixed against assets the business owns - eg stock, premises, vehicles
    • maintain a regular profit in the business, rather than taking too much out

    For more information on preparing to apply for a loan, see tailor your business plan to secure funding.

    Further requirements

    When securing a loan, there are certain requirements you may need to fulfil. Most lenders require you to:

    • share the financial risk by providing capital up to the same amount as you want to borrow - demonstrating your commitment and providing a contingency for repayment if things go wrong
    • provide security for borrowing requests - eg personal or business assets, such as your home or business premises
    • provide personal guarantees if you run a limited company, and the business cannot offer adequate security
    • keep them informed of your progress, particularly changes or problems
    • have a comprehensive business plan and cashflow forecast for larger borrowing requests
    • have a good credit record - including a good payment record with other creditors

    Agreeing the terms of your loan

    Aside from discussing basic issues, such as the due date of the loan and the interest rate, you also need to:

    • establish what the lender's loan fees are
    • agree the covenants
    • check if you can make overpayments
    • see if there is an early repayment charge
    • find out if you can take 'repayment holidays'
    • check to see that late payment charges are practicable

    It is often a good idea to seek professional advice on the terms of the loan and security requirements. They can help you choose the type of loan and lender best suited for your business.

    Standards of conduct for lenders

    The Lending Standards Board (LSB) provides standards for business customers and sets the benchmark for good lending practice in the UK, outlining the way registered firms are expected to deal with their customers.

    Find out more about the LSB.

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  • Where to look for a bank loan

    Potential lenders for a business bank loan and how to secure a loan and get the best deal.

    Banks are the main source of small business loans, but many other organisations provide loans at competitive rates.

    Building societies offer business mortgages and personal loans.

    You can also consider finance from a non-bank lender. See business financing options - an overview.

    Getting the best loan deal

    You should take care to choose the right loan option that best suits your business needs.

    After you have chosen the type of loan that best suits your business needs, you should also try to get the best deal available. To ensure this, you should:

    • Shop around - compare interest rates and negotiate to get the best deal, and ask for any special terms in writing.
    • Use a finance broker - this can save you time and increase your chances by presenting your proposal efficiently to appropriate lenders.
    • Research the small print - assess all lending criteria, such as interest rates, loan terms and set-up fees, plus special deals for start-ups. Consider having an expert, such as a solicitor, review the loan documents.
    • Compare loans between different banks and be prepared to switch providers.
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  • Choosing the right bank for your business

    How to find the right bank for your business and information on specialist and private banks.

    When choosing which bank to set up a business account with, it's a good idea to compare at least two before making a decision. You should consider the various services, fees and facilities that are on offer to enable you to find the best bank for your type of business.

    When comparing banks, you should think about:

    • whether the bank has a dedicated small business team
    • what services they offer and how much they cost
    • how charges are levied - if there is a fee per transaction or a one-off charge
    • whether there are any additional charges - some banks charge for sending out letters or if you exceed your agreed overdraft limit
    • whether there is a local branch - especially if you need to make frequent cash transactions
    • if there are special offers for new businesses or for transferring from another bank
    • whether they offer telephone or internet banking - especially if there is no branch local to you

    Better Business Finance provides further information on business bank accounts.

    You could also open a business account with your current bank if you are happy with their service - they may be supportive if you have a good financial track record and have built up a relationship with them.

    Once you have chosen a bank, it is important to try and develop a good working relationship to get the most of its services. See how to choose and manage a business bank account.

    Specialist banks

    If your business operates in the charity or social enterprise sector - eg co-operatives, employee-owned businesses or social enterprises such as local healthcare or education initiatives - there are specialised social finance banks and other financial bodies that can provide finance.

    Private banks

    Private banks offer bespoke financial services and avoid packaged deals normally associated with high street banks. They generally have a diverse range of products and lending services that meet the individual demands of private individual and business clients - eg lending and deposits, investment and wealth management and savings.

    Help
    Financial Ombudsman Service Consumer Helpline
    Also on this site
    Choose the right finance when starting a business
    Commercial mortgages and lenders
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  • Providing a guarantee for your loan

    How loan guarantees can help you secure funding, and details of personal and limited liability.

    If your bank agrees to lend you money, it may require a guarantee. A guarantee is a promise by a person or an entity to assume a debt obligation in the event of non-payment by the borrower. Your loan agreement should make it clear exactly what security the bank needs.

    Guarantees can be provided by:

    • you, if you run a limited company
    • other people involved in the business

    Banks may also ask another person or business to act as a guarantor. If you cannot meet your repayments, the guarantor may have to pay part or all of the loan or interest.

    If you operate a limited company, banks and major creditors will usually require personal guarantees from the company directors or major shareholders.

    Limited liability protects shareholders from being sued by the business' creditors for their personal assets. Where a personal guarantee for a bank loan is issued, the guarantor can be held personally liable for the debt.

    If possible, ensure that personal guarantees only apply to specific debts or loans as a widely drawn guarantee would render you liable for all of the losses of the business up to the amount of the guarantee. Under the lending code, guarantees given in support of bank account borrowing must not be for an unlimited amount.

    Find information on the Lending Standards Board Standards of Lending Practice.

    The Enterprise Finance Guarantee

    If you need funding for your business, but cannot secure a loan, you may be eligible the British Business Bank's Enterprise Finance Guarantee (EFG).

    EFG facilitates lending to smaller businesses that are viable but unable to obtain finance from their lender. Support includes:

    • term loans
    • revolving facilities, such as overdrafts
    • invoice finance facilities
    • asset finance facilities

    Find out more about the EFG.

    Also on this site
    Tailor your business plan to secure funding
    Choose the right finance when starting a business
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  • Apply for bank finance: step-by-step

    Before applying for bank finance, take a step-by-step approach so that you have the best chance of success.

    When you apply for a bank loan or overdraft, you should take a step-by-step approach to make sure that you give your application the best chance of success.

    Banks often have requirements checklists on their websites, or you can use this checklist as the basis for your application:

    • Background - explain, in writing, the key details about your business, including ownership, management team (including its experience), history and growth development. You should also identify the most important influences on your business, including your main customers, key suppliers and major competition.
    • Purpose - explain in detail why you want the loan or overdraft, including an indication of your aims and objectives. If you have had loans previously, explain what they enabled you to achieve.
    • Risks - demonstrate that you know and understand the risks that might impact on your business, and show how you have taken steps to reduce their effect, as far as possible.
    • Finance - explain who looks after your business' finance, outlining their experience and qualifications. Show that you have solid financial systems in place.
    • Accounts - you'll need to provide financial data. Most banks will want to see annual accounts for the previous three years, as well as management accounts, budgets and forecasts. If you are a new business, or if you are moving to a new bank, you will need additional information such as previous bank statements and figures showing your personal financial situation.
    • Amount - outline what funding you are seeking, including what it will be used for. If you are looking for an overdraft, make sure it takes into account your needs for the foreseeable future.
    • Funding structure - the bank or your accountant will be able to help you decide the best type of finance. It is important to have the right kind of funding structure to cover both working capital and capital investments.
    • Repayment - you need to be clear about how you are going to repay the borrowing. Be realistic about your business expectations and cashflow, and avoid being over-optimistic.

    Security

    Banks will often require your loan or overdraft to be secured when borrowing larger amounts. This can include charges over property or the company's debtors, personal or third party guarantees, or government support.

    Professional advice

    Your accountants, solicitors or trade bodies can provide help in structuring your case, and the bank itself will probably be able to help with loan documentation. For information on finding professional advisers, see choose an accountant for your business and choose a solicitor for your business.

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Types of bank finance for businesses

In this guide:

  • Types of bank finance for businesses

    Sources of short- and long-term bank finance for businesses, including overdrafts, bridging finance and mortgages.

    There are several types of bank finance available to your business, with different packages available to suit your needs as your business requirements change. The type of finance that would best suit your business may be based on the purpose of the finance, how quickly you need finance, and how quickly you could repay it.

    Short-term finance

    Overdrafts are used in conjunction with business bank accounts and are a flexible source of working capital for short-term needs.

    Bridging finance is provided by the bank to businesses to maintain cashflow while awaiting funds from grant cheques, drawdown of commercial mortgages or loan agreements, or other confirmed sources of future income.

    Working capital funding

    Invoice finance offers ways to access working capital by unlocking the value of invoices, although interest rates and charges apply on the cash advanced. Invoice discounting allows you to draw on funding secured against approved invoices, while in factoring you can sell invoices to your financier. If your buyer introduces a supplier finance scheme (also known as supply chain finance or reverse factoring), this will provide the same benefits at a potentially much lower cost.

    See factoring and invoice discounting.

    Medium-term finance

    Term loans have a fixed or variable interest rate and mature over a one- to seven-year period. They are typically used to buy fixed assets such as property or machinery or other purchases of a capital nature. 

    Asset finance and leasing options allow businesses to spread the ownership associated with buying assets. When you buy assets through leasing finance, the leasing bank buys the equipment for you to use, in exchange for regular payments. Leasing or hire purchase can help you maintain cashflow and allow greater flexibility in upgrading equipment.

    For more information, see decide whether to lease or buy assets.

    Long-term finance

    Commercial mortgages are provided by banks to finance the purchase of business premises. Types of mortgage available include repayment, commercial endowment or pension. The mortgage will usually be repayable over a 15-year period.

    You can get advice on the best providers of commercial mortgages from your bank's business adviser or a commercial mortgage broker. For more information, see commercial mortgages and lenders.

    Fixed asset loans are loans for assets that cannot easily be turned into cash - eg property, plant or machinery. The loans can be fixed for up to ten years. With this type of loan, the asset itself is the collateral and can be repossessed if you do not maintain repayments. 

    Banks may also provide a range of specialist services to fund expansions, mergers or acquisitions. For more information, see raise long-term funding through debt capital markets.

    However, there may be situations when you are unable to obtain finance from a bank. If this is the case, there are other finance options available to you - see non-bank finance.

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  • Is your business ready for bank financing?

    Even before seeking finance, you need to be clear in your own mind about why you need it, and how much.

    When you seek finance for your business, you will give yourself the best possible chance of success if you are clear about your business' requirements. Consider the following:

    1. Why do you need business funding?

    It may be to finance business expansion, to develop or exploit new products, for new premises or a number of other reasons. It should be for something specific, and be carefully costed. Banks will want to know the business case before they agree to supply funding, so you should think about the reasoning, the potential outcomes of the investment and how you will repay the finance.

    2. How much funding do you need and when will you need it?

    Although it does not make business sense to borrow more than you need, you should be careful not to underestimate - aim for the optimum amount. You should also consider whether you need all of the money at once, or whether staged amounts would work, as this may reduce the cost of borrowing with lower interest costs and initial repayments.

    3. How are you going to repay the borrowing?

    You will need to repay the loan in the future, with interest. Ask yourself when you are likely to start seeing a return on your investment, and how much the monthly repayments will affect your cashflow.

    4. What is the right source of finance for you?

    There are several different types of investment finance, and you will stand a much greater chance of securing financing if you can clearly explain why the source you are approaching is most appropriate for you, and any potential drawbacks.

    For more information, see types of bank finance for businesses.

    5. Is there anything that would impact your chance to borrow?

    There are some things which will weigh against an application for loans or other funding:

    • unauthorised overdrafts
    • missed loan repayments
    • County Court judgements against the business or its directors
    • adverse credit rating data, against the business or its directors

    There are also some factors which would automatically disqualify a potential borrower. These include:

    • a history of illegal activity on the part of the business or individual
    • if the business is in administration, or the individual has bankruptcy proceedings in process against them
    • where the potential borrower is under the age of 18
    • when the business could pose a risk to the reputation of the bank

    Bank finance may not be the best option for your business and there are a number of alternatives available to you - see business financing options - an overview.

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  • Advantages and disadvantages of bank loans

    What loans are, their advantages and disadvantages, and how to know when they are suitable for your business' needs.

    A loan is an amount of money borrowed for a set period within an agreed repayment schedule. The repayment amount will depend on the size and duration of the loan and the rate of interest.

    Loans are generally most suitable for:

    • paying for assets eg vehicles and computers
    • start-up capital
    • instances where the amount of money you need is not going to change

    The terms and price of loans will vary between providers and will reflect the risk and cost to the bank in providing the finance. For larger sums, the pricing and terms may be negotiable.

    Banks will loan money to businesses on the basis of an adequate return for their investment, to reflect the risks of defaulting and to cover administrative costs. If you have an established relationship with your bank, they will have developed a good understanding of your business. This will help them to advise you about the best product for your financial needs.

    Different types of bank loan include:

    • working capital loans - for short notice or emergency situations
    • fixed asset loans - for buying assets where the asset itself is collateral
    • factoring loans - loans based on money owed to your business by customers
    • hire purchase loans - for long-term purchase of assets such as vehicles or machinery

    Advantages of term loans

    • The loan is not repayable on demand and so available for the term of the loan - generally three to ten years - unless you breach the loan conditions.
    • Loans can be tied to the lifetime of the equipment or other assets you're borrowing the money to pay for.
    • At the beginning of the term of the loan you may be able to negotiate a repayment holiday, meaning that you only pay interest for a certain amount of time while repayments on the capital are frozen.
    • While you must pay interest on your loan, you do not have to give the lender a percentage of your profits or a share in your company.
    • Interest rates may be fixed for the term so you will know the level of repayments throughout the life of the loan.
    • There may be an arrangement fee that is paid at the start of the loan but not throughout its life. If it is an on-demand loan, an annual renewal fee may be payable.

    Disadvantages of loans

    • Larger loans will have certain terms and conditions or covenants that you must adhere to, such as the provision of quarterly management information.
    • Loans are not very flexible - you could be paying interest on funds you're not using.
    • You could have trouble making monthly repayments if your customers don't pay you promptly, causing cashflow problems.
    • In some cases, loans are secured against the assets of the business or your personal possessions, eg your home. The interest rates for secured loans may be lower than for unsecured ones, but your assets or home could be at risk if you cannot make the repayments.
    • There may be a charge if you want to repay the loan before the end of the loan term, particularly if the interest rate on the loan is fixed.

    When loans are not suitable

    It is not a good idea to take out a loan for ongoing expenses, as it may be difficult to keep up repayments. Ongoing expenses are instead best funded from cash received from sales, possibly with an overdraft as backup. 

    If you cannot obtain a loan or other type of finance from your bank, there are other finance options available to you. For more information, see business financing options - an overview.

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  • Advantages and disadvantages of overdrafts

    The flexibility, advantages, drawbacks and costs of using an overdraft facility.

    An overdraft is a borrowing facility attached to your bank account, set at an agreed limit. It can be drawn on at any time and is most useful for your day-to-day expenses as it can help you to manage your cashflow more flexibly.

    It is worth noting that loans are probably more appropriate for long-term funding. An overdraft is likely to cost more than a loan for a long-term purchase.

    Advantages of an overdraft

    • An overdraft is flexible - you only borrow what you need at the time which may make it cheaper than a loan.
    • It's quick to arrange.
    • There is not normally a charge for paying off the overdraft earlier than expected.

    Disadvantages of an overdraft

    • If you have to extend your overdraft, you usually have to pay an arrangement fee.
    • Your bank could charge you if you exceed your overdraft limit without authorisation.
    • The bank has the right to ask for repayment of your overdraft amount at any time, although this is unlikely to happen unless you get into financial difficulties.
    • Overdrafts may be secured against business assets.
    • Unlike loans you can only get an overdraft from the bank where you maintain your current account. In order to get an overdraft elsewhere you need to transfer your business bank account.
    • The interest rate applied is nearly always variable, making it difficult to accurately calculate your borrowing costs.
    • Unutilised overdraft facilities may be reduced by the banks at short notice, although this is unlikely to happen unless you get into financial difficulties.

    Bear in mind that what starts out as a good deal may change - as may your business needs. It's worth reviewing your options regularly.

    Also on this site
    Identify potential cashflow problems
    Choose the right finance when starting a business
    Content category
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  • What you need when applying for a bank loan

    Banks have a number of core criteria which they will take into account in assessing your finance application.

    Before you look for a financial provider, you should ensure that your business is able to meet the requirements of potential lenders and secure a deal that will benefit your business.

    One way to make sure your business is prepared is to ensure your business plan is up to date, and that you are well informed about your own finances. For example, you should be able to discuss:

    • your audited accounts for the past two years
    • evidence of your current performance
    • a profit-and-loss forecast for next year
    • business bank statements for the past six months
    • profiles of each partner or director in your business

    You will also need to be clear about the amount of money you require and what it will be used for.

    For more information, see cashflow management.

    It is also important that your business and personal credit ratings are up to date and as free from errors as possible. You can improve your credit rating by ensuring that you:

    • pay your suppliers regularly
    • capitalise the business by investing your own funds, in the form of loans fixed against assets the business owns - eg stock, premises, vehicles
    • maintain a regular profit in the business, rather than taking too much out

    For more information on preparing to apply for a loan, see tailor your business plan to secure funding.

    Further requirements

    When securing a loan, there are certain requirements you may need to fulfil. Most lenders require you to:

    • share the financial risk by providing capital up to the same amount as you want to borrow - demonstrating your commitment and providing a contingency for repayment if things go wrong
    • provide security for borrowing requests - eg personal or business assets, such as your home or business premises
    • provide personal guarantees if you run a limited company, and the business cannot offer adequate security
    • keep them informed of your progress, particularly changes or problems
    • have a comprehensive business plan and cashflow forecast for larger borrowing requests
    • have a good credit record - including a good payment record with other creditors

    Agreeing the terms of your loan

    Aside from discussing basic issues, such as the due date of the loan and the interest rate, you also need to:

    • establish what the lender's loan fees are
    • agree the covenants
    • check if you can make overpayments
    • see if there is an early repayment charge
    • find out if you can take 'repayment holidays'
    • check to see that late payment charges are practicable

    It is often a good idea to seek professional advice on the terms of the loan and security requirements. They can help you choose the type of loan and lender best suited for your business.

    Standards of conduct for lenders

    The Lending Standards Board (LSB) provides standards for business customers and sets the benchmark for good lending practice in the UK, outlining the way registered firms are expected to deal with their customers.

    Find out more about the LSB.

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  • Where to look for a bank loan

    Potential lenders for a business bank loan and how to secure a loan and get the best deal.

    Banks are the main source of small business loans, but many other organisations provide loans at competitive rates.

    Building societies offer business mortgages and personal loans.

    You can also consider finance from a non-bank lender. See business financing options - an overview.

    Getting the best loan deal

    You should take care to choose the right loan option that best suits your business needs.

    After you have chosen the type of loan that best suits your business needs, you should also try to get the best deal available. To ensure this, you should:

    • Shop around - compare interest rates and negotiate to get the best deal, and ask for any special terms in writing.
    • Use a finance broker - this can save you time and increase your chances by presenting your proposal efficiently to appropriate lenders.
    • Research the small print - assess all lending criteria, such as interest rates, loan terms and set-up fees, plus special deals for start-ups. Consider having an expert, such as a solicitor, review the loan documents.
    • Compare loans between different banks and be prepared to switch providers.
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  • Choosing the right bank for your business

    How to find the right bank for your business and information on specialist and private banks.

    When choosing which bank to set up a business account with, it's a good idea to compare at least two before making a decision. You should consider the various services, fees and facilities that are on offer to enable you to find the best bank for your type of business.

    When comparing banks, you should think about:

    • whether the bank has a dedicated small business team
    • what services they offer and how much they cost
    • how charges are levied - if there is a fee per transaction or a one-off charge
    • whether there are any additional charges - some banks charge for sending out letters or if you exceed your agreed overdraft limit
    • whether there is a local branch - especially if you need to make frequent cash transactions
    • if there are special offers for new businesses or for transferring from another bank
    • whether they offer telephone or internet banking - especially if there is no branch local to you

    Better Business Finance provides further information on business bank accounts.

    You could also open a business account with your current bank if you are happy with their service - they may be supportive if you have a good financial track record and have built up a relationship with them.

    Once you have chosen a bank, it is important to try and develop a good working relationship to get the most of its services. See how to choose and manage a business bank account.

    Specialist banks

    If your business operates in the charity or social enterprise sector - eg co-operatives, employee-owned businesses or social enterprises such as local healthcare or education initiatives - there are specialised social finance banks and other financial bodies that can provide finance.

    Private banks

    Private banks offer bespoke financial services and avoid packaged deals normally associated with high street banks. They generally have a diverse range of products and lending services that meet the individual demands of private individual and business clients - eg lending and deposits, investment and wealth management and savings.

    Help
    Financial Ombudsman Service Consumer Helpline
    Also on this site
    Choose the right finance when starting a business
    Commercial mortgages and lenders
    Content category
    Finance

    Source URL

    /content/choosing-right-bank-your-business

    Links

  • Providing a guarantee for your loan

    How loan guarantees can help you secure funding, and details of personal and limited liability.

    If your bank agrees to lend you money, it may require a guarantee. A guarantee is a promise by a person or an entity to assume a debt obligation in the event of non-payment by the borrower. Your loan agreement should make it clear exactly what security the bank needs.

    Guarantees can be provided by:

    • you, if you run a limited company
    • other people involved in the business

    Banks may also ask another person or business to act as a guarantor. If you cannot meet your repayments, the guarantor may have to pay part or all of the loan or interest.

    If you operate a limited company, banks and major creditors will usually require personal guarantees from the company directors or major shareholders.

    Limited liability protects shareholders from being sued by the business' creditors for their personal assets. Where a personal guarantee for a bank loan is issued, the guarantor can be held personally liable for the debt.

    If possible, ensure that personal guarantees only apply to specific debts or loans as a widely drawn guarantee would render you liable for all of the losses of the business up to the amount of the guarantee. Under the lending code, guarantees given in support of bank account borrowing must not be for an unlimited amount.

    Find information on the Lending Standards Board Standards of Lending Practice.

    The Enterprise Finance Guarantee

    If you need funding for your business, but cannot secure a loan, you may be eligible the British Business Bank's Enterprise Finance Guarantee (EFG).

    EFG facilitates lending to smaller businesses that are viable but unable to obtain finance from their lender. Support includes:

    • term loans
    • revolving facilities, such as overdrafts
    • invoice finance facilities
    • asset finance facilities

    Find out more about the EFG.

    Also on this site
    Tailor your business plan to secure funding
    Choose the right finance when starting a business
    Content category
    Finance

    Source URL

    /content/providing-guarantee-your-loan

    Links

  • Apply for bank finance: step-by-step

    Before applying for bank finance, take a step-by-step approach so that you have the best chance of success.

    When you apply for a bank loan or overdraft, you should take a step-by-step approach to make sure that you give your application the best chance of success.

    Banks often have requirements checklists on their websites, or you can use this checklist as the basis for your application:

    • Background - explain, in writing, the key details about your business, including ownership, management team (including its experience), history and growth development. You should also identify the most important influences on your business, including your main customers, key suppliers and major competition.
    • Purpose - explain in detail why you want the loan or overdraft, including an indication of your aims and objectives. If you have had loans previously, explain what they enabled you to achieve.
    • Risks - demonstrate that you know and understand the risks that might impact on your business, and show how you have taken steps to reduce their effect, as far as possible.
    • Finance - explain who looks after your business' finance, outlining their experience and qualifications. Show that you have solid financial systems in place.
    • Accounts - you'll need to provide financial data. Most banks will want to see annual accounts for the previous three years, as well as management accounts, budgets and forecasts. If you are a new business, or if you are moving to a new bank, you will need additional information such as previous bank statements and figures showing your personal financial situation.
    • Amount - outline what funding you are seeking, including what it will be used for. If you are looking for an overdraft, make sure it takes into account your needs for the foreseeable future.
    • Funding structure - the bank or your accountant will be able to help you decide the best type of finance. It is important to have the right kind of funding structure to cover both working capital and capital investments.
    • Repayment - you need to be clear about how you are going to repay the borrowing. Be realistic about your business expectations and cashflow, and avoid being over-optimistic.

    Security

    Banks will often require your loan or overdraft to be secured when borrowing larger amounts. This can include charges over property or the company's debtors, personal or third party guarantees, or government support.

    Professional advice

    Your accountants, solicitors or trade bodies can provide help in structuring your case, and the bank itself will probably be able to help with loan documentation. For information on finding professional advisers, see choose an accountant for your business and choose a solicitor for your business.

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Purpose of business angels

In this guide:

  • Purpose of business angels

    How business angels operate and how they choose the businesses they invest in.

    Business angel (BA) investment is a form of venture capital funding where private individuals invest in companies in exchange for a share of their equity. Most BAs invest between £10,000 and £500,000.

    How BAs invest

    BAs invest in start-ups or young businesses needing to fund activities such as product development or market expansion.

    Many investments offer potentially high returns but also involve high risks. A BA investment can often result in the total loss of the amount invested, while other investments may provide a 10x + return depending on the success of the business.

    This has led to the introduction of the Enterprise Investment Scheme (EIS) and the Seed Enterprise Investment Scheme (SEIS). EIS and SEIS are the two best tax schemes for investors in the world and they can dramatically reduce the risk involved for BAs.

    BAs can make investment decisions quickly but will still need to see that you have a good business plan before they commit. Many specialise in particular industries, making them a potentially valuable source of expert knowledge and even mentoring.

    Government match funding

    The government provides some funds to match BA investments, such as those provided in Northern Ireland by techstart NI and Co-Fund NI ll.

    • techstart NI provide funding support for entrepreneurs, seed and early stage SMEs and university spin-outs
    • Co-Fund NI  have an equity fund that co-invests alongside business angels and other private investors

    The Angel Co Fund operates on a similar basis to Co-Fund NI, where it will allow angels to complete a funding round. 

    Finding a business angel

    BAs may not make investments regularly and it could take you several months to find a suitable investor.

    You can look for a BA through networks such as UK Business Angels Association (UKBAA), Halo Business Angel Network (HBAN) and European Business Angels Network (EBAN).

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  • Advantages and disadvantages of business angel funding

    Investment from a business angel could help your business but it’s also important to consider any disadvantages of using an angel investor.

    Before approaching a business angel (BA) for investment, you should consider whether other forms of finance could better meet your organisation's needs. For other sources of alternative funding, see equity finance.

    Advantages of business angel financing

    Six advantages of business angel investors:

    • BAs are free to make investment decisions quickly
    • no need for collateral ie personal assets
    • access to your investor's sector knowledge and contacts
    • better discipline due to outside scrutiny
    • access to BA mentoring or management skills
    • no repayments or interest

    Disadvantages of business angel financing

    Four disadvantages of business angel investors:

    • not suitable for investments below £10,000 or more than £500,000
    • takes longer to find a suitable angel investor
    • giving up a share of your business
    • less structural support available from a BA than from an investing company

    Venture capital funding

    Venture capital companies make larger investments than BAs making them suitable for bigger companies with more complex plans.

    The mindset of a VC is different to that of a BA. A VC is representing limited partners such as bank, insurance and pension funds and need to be aggressive in order to produce the best returns so they can raise their next fund.

    They are likely to have a more formal relationship with the businesses they invest in and to build exit procedures into agreements. Due diligence for venture capital investments can also be more expensive for your business and take longer than with BA deal - see venture capital.

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  • How to secure business angel investment

    Preparing your business to apply for business angel funding.

    Before you apply for business angel (BA) investment, you should make a shortlist of potential investors you feel would be a good match with your company.

    Making your business investment ready

    Your business should be investment ready before you apply for funding. This means preparing a thoroughly researched business case, including a realistic valuation of your company's worth.

    You should provide:

    • audited accounts for the past two years
    • evidence of current performance
    • profit-and-loss forecast for next year
    • business bank statements for the past six months
    • profiles of each partner or director in your business

    Pitching to business angels

    Business angels are more likely to be interested in your proposal if they:

    • understand the product or service
    • have worked in the same industry
    • are confident your business is well managed
    • feel they can bring added value to your business
    • are not being asked for a huge investment, or repeated investments

    When pitching your business plan to a BA you should cover:

    • the benefits they would gain by investing
    • details of the investment required
    • terms of the proposed deal - eg share of control, skills you offer and timescale of investment
    • the ability of your management team to implement the plan

    Read more on how to prepare your pitch to secure finance.

    Finalising the BA investment deal

    It can take several months to finalise BA deals legally and for funds to be transferred. You should also allow for additional finance to cover legal fees and bank charges.

    Legal elements of BA deals include:

    • shareholders' agreement - relationship between the shareholders
    • subscription or investment agreement - terms of the share subscription
    • service agreement - eg employment contracts with managers or directors
    • other contracts - with more junior employees, suppliers, or customers
    • disclosure letter - details of any warranties or assurances agreed between the parties
    • memorandum - list of company's powers and the amount of share capital
    • articles of association - company's internal regulations
    • share options - eg giving tax-advantaged share options to new or existing employees under the government's Enterprise Management Incentive (EMI) scheme

    For more information see secure equity investment.

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  • How to find business angel networks

    Finding a business angel investor using a business angel network.

    You can find individual business angel (BA) investors, or syndicates, through BA networks in the UK and Europe. 

    BA networks include:

    • Halo Business Angel Network (HBAN)
    • UK Business Angels Association (UKBAA)
    • European Business Angel Network (EBAN)

    BA networks help companies find an investor who is right for their funding needs. They also give investors details of companies they might want to invest in.

    HBAN

    HBAN is the all island representative body for business angels on the island of Ireland with a specific remit to establish business angel syndicates.

    In addition to regional and sectoral syndicates, the network supports a number of all island vertical syndicates in the food and med tech space and hence companies in Northern Ireland can apply to pitch for funding to these networks.

    Through HBAN 2.0, there is now a focus on the leverage of cutting-edge technology and end-to-end digitisation to streamline the investment process for angels and start-ups. Read more on HBAN 2.0.

    Find out more about HBAN's work throughout Ireland.

    UKBAA

    The UKBAA is a trade association for BA investors, promoting early stage investment in UK companies by bringing together investors and companies looking for funding.

    BAs, venture capital networks, and associate organisations such as solicitors and accountants pay membership fees to join the BBAA but the service is free for companies seeking investment.

    Find out more about sourcing a BA investor with UKBAA.

    EBAN

    EBAN is the European Trade Association for BA investment and seed funds. The organisation comprises over 250 BA networks and around 20,000 individual investors.

    The organisation offers membership packages to individual BAs, BA networks and other associated organisations.

    Find out about EBAN BA investment networks.

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  • Business angels

    Using business angel investment to grow our business - Pitchbooking

    How Pitchbooking has successfully grown through business angel investment.

    Pitchbooking is an online system that aims to simplify the process for customers booking sports facilities, and for organisations managing the amenities and booking process. The platform is used by over 1,000 sports facilities in over 100 locations across the UK.

    Founded by childhood friends, Fearghal Campbell, Chris McCann and Shea O'Hagan, the idea came out of a need to solve their problem. Booking and paying for a casual game of 5-a side football in their hometown of Lurgan was a bigger ordeal than it should have been. 

    Pitchbooking allows customers to browse the availability of facilities and book spaces online while aiming to eliminate the administrative burden for sport facilities managers by giving them the tools to manage bookings and payments.

    Fearghal explains how the company has grown through business angel investment.

    Starting the business

    "We have always been amazed at how much money is spent on building and maintaining sports facilities in the UK and Ireland, but the processes for booking and paying to use them are so time-consuming. So, we created Pitchbooking to solve this problem."

    "In the initial stages, as a fledgling tech company, Invest NI was a source of financial and advisory support in helping us to establish the business."

    Decide on the help you need and connect with investors

    "We had a strong vision of what our product could do for sports facilities across the country, and an aggressive plan of how quickly we could get there. Approximately nine months following our product launch, and with positive feedback from our customers, we decided that business angel investment was needed to realise this growth."

    "We were able to get in touch with potential investors through introductions from connections - reaching out to the local networks and even some cold emailing and LinkedIn approaches to angels, who we believed would be suitable for us."

    "We found that warm introductions were superior to cold outreach. The chance of a reply multiplies when you have someone to make an introduction for you. Putting in the time to find a mutual connection, and asking them to make the introduction, is well worth the effort."

    Prepare your business for investment

    "We are a software as well as a service business, so understanding our cost to acquire a new paying customer plus their life-time value to us was important to potential investors. I believe the fact that we were so diligent and well prepared with our numbers impressed our investors."

    "When we presented to potential investors, we explained why the challenge we aimed to address was such a significant issue, and why we are the team to solve it. We highlighted how lucrative it would be to the company that gets it right. We also covered our product and customer traction."

    "It takes longer than you would think to finalise a deal, months not days, and this appears to be the consensus with our peer group too."

    Capitalise on the investment and support you receive

    "Officially, we speak with our investors quarterly, but we will turn to them when we need advice on a challenge or an opportunity. Our investors are varied in their experience - some are from the world of tech start-ups, others have a background in sports facility management. So we turn to the individual we think can give the best input on the particular situation."

    "We would not have had the financial or advisory backing to grow without our team of investors. In simple terms, we would not have been able to capitalise on key business opportunities without investor backing."

    Communicate effectively

    "It's important to remember to keep your investors updated regularly on how the company is progressing. It's often one of the first tasks that slide off the to-do list when things get busy, but they are a part of your company and are there to help."

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Payment Card Industry Data Security Standard compliance

In this guide:

  • Online payment jargon

    The key concepts in online debit and credit card payments.

    Debit and credit card payments and their application online involve some key concepts and jargon.

    Acquirers

    An acquirer can be a high street bank or other financial institution that offers credit and debit card accepting/processing services. It acquires the money from the customer, processes the transaction and credits your account.

    Internet merchant accounts (IMAs)

    You need to apply for a merchant service agreement if you want a bank to handle your electronic payments. For web-based online transactions you need an IMA.

    Obtaining an IMA from an acquirer may be quicker and easier if you already have 'offline' card-processing facilities set up. In this case, just ask your acquirer for an additional IMA ID for use exclusively with internet transactions. This process is normally quick, especially if the risk to your business does not change.

    Payment service providers (PSPs)

    A PSP will provide you with a 'virtual' till or terminal that collects card details over the internet and passes them to the acquiring bank. To take electronic payments over the web, you will need a PSP.

    Your choice of PSP will depend on its cost and compatibility with your chosen e-commerce software solution. 

    Some acquiring banks offer PSP services as part of their product and there are other less expensive options available.

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  • Payment Card Industry Data Security Standard compliance

    The Payment Card Industry Data Security Standard is applicable to any organisation that stores, transmits or processes cardholder information.

    The Payment Card Industry Data Security Standard (PCI DSS) - is a worldwide security standard developed to protect cardholders' personal information. It includes requirements for security management, network architecture, software design, security policies and procedures, and other protection of customer account data. The standard is applicable to any organisation that stores, transmits or processes cardholder information.

    Each of PCI (Security Standards Council’s (SSC) founding payment brand members (American Express, Discover, JCB International, MasterCard and Visa) currently have their own PCI compliance programs for the protection of their affiliated payment card account data. Entities should contact the payment brands directly for information about their compliance programs.

    Questions regarding compliance requirements for payment card account data affiliated with other payment networks or brands should be referred to the applicable payment network or brand.

    Failure to be annually certified can become an issue if you have a security breach and your customers' card details are stolen. 

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  • Selecting the best online payment option

    Choosing between internet merchant accounts, payment-processing companies and online shopping malls.

    You can use the following scenarios to help you choose the best option for your business.

    Internet merchant account (IMA)

    Your business already accepts debit and credit card payments for face-to-face transactions. You expect a fairly high number of online transactions, most of which will be simple and low risk. You need the greatest amount of flexibility in operating your business and cashflow is very important. If this sounds like your business, then you should:

    Payment-processing company

    Your business will not have a large number of online transactions and you do not currently accept debit or credit card transactions so do not have an IMA. You have not been trading long and cannot provide a well-documented operations history.

    You value the ability to attract online sales more highly than the ability to collect sales income quickly. Your business will need some flexibility in the way in which it designs and operates its website, so you should:

    Online marketplace

    Your business is small, you do not currently offer debit or credit card sales and you have very limited IT skills. Your products are fairly standardised and easily understood. You are prepared to pay higher transaction and fixed costs just to establish a web presence.

    If this applies to your business, you should:

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  • Set up an internet merchant account

    Internet merchant accounts and the issues to consider when setting them up.

    An internet merchant account (IMA) is a type of account that enables you to accept customers' credit and debit card payments directly online.

    There are other ways of processing credit and debit card payments for online sales, including online payment processing services, and online market places. These also enable you to receive payment from customers. Make sure you check any ongoing charges, such as monthly fees and transaction charges.

    For more information see: 

    Several banks and processors offer IMAs. These are referred to as merchant acquirers or acquiring banks - see find a bank to process your online payments.

    Even if you already have a merchant account for face-to-face transactions, you will still need one specifically to accept online payments directly from customers' credit or debit cards.

    Card users will visit your internet shop to order your goods or services and make payments, and the funds will usually be in your bank account after three or four working days.

    Beware of fraud

    Online card payments are classed as 'card-not-present' transactions, because you can't physically check the card or the cardholder. If a transaction proves to be fraudulent, the money will be reclaimed from your bank account - this is known as a chargeback. Even if a card-not-present transaction is authorised by the cardholder's bank, this doesn't necessarily guarantee payment.

    To help guard against fraud, where a cardholder claims that they did not authorise a payment, check to see if your online payment card processor can offer the card scheme's authentication service - MasterCard SecureCode and Verified by Visa.

    The costs

    Acquiring banks may charge for their services. There may be a sign-up fee and day-to-day charges may be a fixed fee in the case of debit card transactions or a percentage of each transaction for credit cards.

    In addition, where you are using a payment service provider, they will charge you for their service.

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  • Find a bank to process your online payments

    Finding acquiring banks that offer internet merchant accounts.

    Online payments are processed by acquiring banks where businesses can open an internet merchant account (IMA). These banks include:

    • Barclaycard Business
    • HSBC
    • Lloyds Banking Group
    • NatWest/Royal Bank of Scotland
    • Ulster Bank

    The following charge-card companies also act as acquiring banks:

    • American Express
    • Diners Club

    American Express and Diners Club will only accept payments from their own cards.

    The acquiring banks have strict requirements and it's possible that even the bank you use for your business current account may refuse you - see checklist: applying for an internet merchant account. Alternatively, there are other IMA providers that you can find online.

    Once the IMA has been set up, secure socket layer (SSL) technology is used to encrypt transaction data and to send the necessary customer and card details to the acquiring bank in order to authorise the purchase. You should, therefore, ensure that any web-hosting solution you are considering can support the HTTPS SSL protocol.

    General Data Protection Regulation (GDPR)

    Under GDPR, the Information Commissioner's Office can issue fines for data security breaches. The size of the fine will depend on the size and scope of the breach, if the breach was deliberate or accidental, the affected organisation's finances and how much trouble the breach caused.

    See GDPR penalties and fines.

    In order to help reduce security breaches, organisations need to comply with the Payment Card Industry Data Security Standard - see Payment Card Industry Data Security Standard compliance.

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  • Checklist: applying for an internet merchant account

    The requirements you will need to satisfy when applying to a bank for an internet merchant account.

    Banks that offer internet merchant accounts (IMAs) for accepting card payments have strict requirements. When you apply for an IMA, the bank will want to know certain details about you and your business.

    You will need to:

    • outline your business plan - including details of your cashflow and how you'll promote your online activities
    • supply your website address
    • explain the details of your product or service
    • give your suppliers' details
    • describe how you will deliver your product or service
    • set out your terms and conditions for online trading
    • work out your expected average online transaction values, your estimated turnover from online sales and your predicted number of credit and debit card transactions
    • provide details of the secure server you'll use
    • make your audited business accounts available
    • supply your bank details and provide authority to the bank to carry out a check with credit reference agencies
    • detail your trading history
    • provide information about the directors or partners in the business - including full contact details
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  • Advantages and disadvantages of using a payment-processing company

    Using payment-processing companies to handle online card transactions has advantages, but it is also worthwhile to consider the disadvantages.

    Payment-processing companies obtain payment from your customers' credit and debit cards on your behalf and forward the money to you.

    They offer a useful alternative for businesses who have a smaller turnover from card transactions or who can't open an internet merchant account (IMA) with an acquiring bank. Examples include PayPal, Shopify and Worldpay.

    Advantages of using a payment-processing company

    Some of the potential benefits are summarised below:

    • Payment-processing companies relieve you of the administrative burden of managing customers' card details and running an IMA.
    • They save you from having to set up secure payment systems.
    • They have less strict application procedures than an IMA requires. For example, you'll not usually be required to supply the same level of detailed information about your business plan, trading history and suppliers.
    • Your application can be processed much more quickly than for an IMA.

    Disadvantages of using a payment-processing company

    There can be drawbacks to using a payment-processing company - consider the following:

    • Customers can see that the payment is not going directly to you even though they may be conducting the transaction through your website.
    • Payment-processing companies may hold payments for a settlement period of 30-60 days before the money reaches your account.
    • Charges are generally higher than for an IMA. However, costs are falling and the market for these services is competitive.
    • If a card is used fraudulently, the value of the transaction will be reclaimed from your business. However, you may be able to get insurance to cover this risk.
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  • Advantages and disadvantages of selling through online marketplaces

    Using an online marketplace for your business has many advantages, but it is also worthwhile to consider the disadvantages.

    An online marketplace can be a good alternative if:

    • you're looking for an online route to customers as an optional extra to your normal sales channels
    • you want to extend the number of online outlets your customers can use

    An online marketplace brings together a number of online shops on the same website, often from the same sector. It hosts your online shop and processes payments for you. Examples include Amazon and eBay.

    Marketplaces will often provide software to help you set up your shop and receive card payments on your behalf. You maintain and update your own shop within the market place, but most of the administration is done for you.

    Many internet service providers offer online mall facilities, as do specialist companies. If you sell to a particular trade or industry, the relevant trade association may be able to put you in touch with a dedicated mall.

    The Trade Association Forum (TAF) provides a directory of trade associations.

    Advantages of selling through online marketplaces

    Online marketplaces can be a great opportunity for some businesses, the advantages include:

    • Online shopping market places give an immediate online presence.
    • Sector-specific marketplaces can provide an effective route to your target market.
    • They allow new opportunities for overseas sales.
    • They're easy to set up for people with moderate IT skills.
    • You don't need to go through the process of setting up an internet merchant account.
    • You often get help and support in getting your store operational.

    Disadvantages of selling through online marketplaces

    It is worthwhile to consider the disadvantages that come with using online marketplaces for your business:

    • Online marketplaces may often be an expensive way to sell online.
    • Generally you'll have to pay a fee and a percentage of each transaction made through the marketplace - charges per transaction can be higher than processing payments yourself.
    • You may also have to pay a monthly or annual fee - charges vary substantially.
    • Your shop is often tied into a standard format.

    Read further guidance on selling through online marketplaces.

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  • Advantages and disadvantages of using cryptocurrency

    Cryptocurrency has advantages and disadvantages for businesses with a reduction in intermediary fees balanced against vulnerability to scams.

    Cryptocurrency is a digital version of money that takes the form of virtual tokens or coins. You can use it to buy or sell items from people or companies that accept such payments.

    There are a range of cryptocurrencies available including, Bitcoin, Ethereum, Litecoin and Cardano, each with individual values and rules. Bitcoin is currently the most widely used.

    To make a Bitcoin payment, Bitcoins are transferred from a digital wallet, which are obtained when you buy the currency from a crypto exchange, to someone else’s using an app or website and the person’s unique Bitcoin address.

    Advantages of using cryptocurrency

    Using cryptocurrency could offer opportunities for some businesses. The benefits may include:

    • A cryptocurrency transaction is generally a quick and straightforward process. For example, Bitcoins can be transferred from one digital wallet to another, using only a smartphone or computer.
    • Every cryptocurrency transaction is recorded in a public list called the blockchain, which is the technology that enables its existence. This makes it possible to trace the history of Bitcoins to stop people from spending coins they do not own, making copies or undoing transactions.
    • Blockchain aims to cut out intermediaries, such as banks and online marketplaces, which means there are no payment processing fees.
    • Cyptocurrency payments are becoming more widely used, amongst large organisations, and in sectors including fashion and pharmaceuticals.

    Disadvantages of using cryptocurrency

    There are some business disadvantages to using cryptocurrency:

    • It is possible to lose your virtual wallet or delete your currency. There have also been thefts from websites that let you store your cryptocurrency remotely.
    • The value of cryptocurrencies such as Bitcoins can change significantly, so some people don't feel it is safe to turn 'real' money into Bitcoins.
    • The Financial Conduct Authority (FCA) has oversight to check that cryptocurrency organisations have effective anti-money laundering and terrorist financing procedures in place, but generally cryptocurrency exchanges themselves are not regulated.
    • If companies or consumers move to a new cryptocurrency from you or stop using digital currencies entirely, it could lose value and become worthless.
    • Cryptocurrency exchanges are targets of cyber attacks, which could lead to an irreparable loss of your investment.
    • Cryptocurrency can be vulnerable to scams or used as a payment mechanism of a scam. Scammers often use platforms like Facebook, Instagram and X (formerly known as Twitter) to trick people into these investments. If you suspect you’ve been targeted, it's important to report this to Action Fraud as soon as possible. Read more on how to report a cyber crime.

    Cryptocurrency can be a risky investment and you should only consider investing if you're financially equipped and willing to lose any money that you put into it.

    Read further guidance on cyber security for business.

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Selecting the best online payment option

In this guide:

  • Online payment jargon

    The key concepts in online debit and credit card payments.

    Debit and credit card payments and their application online involve some key concepts and jargon.

    Acquirers

    An acquirer can be a high street bank or other financial institution that offers credit and debit card accepting/processing services. It acquires the money from the customer, processes the transaction and credits your account.

    Internet merchant accounts (IMAs)

    You need to apply for a merchant service agreement if you want a bank to handle your electronic payments. For web-based online transactions you need an IMA.

    Obtaining an IMA from an acquirer may be quicker and easier if you already have 'offline' card-processing facilities set up. In this case, just ask your acquirer for an additional IMA ID for use exclusively with internet transactions. This process is normally quick, especially if the risk to your business does not change.

    Payment service providers (PSPs)

    A PSP will provide you with a 'virtual' till or terminal that collects card details over the internet and passes them to the acquiring bank. To take electronic payments over the web, you will need a PSP.

    Your choice of PSP will depend on its cost and compatibility with your chosen e-commerce software solution. 

    Some acquiring banks offer PSP services as part of their product and there are other less expensive options available.

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  • Payment Card Industry Data Security Standard compliance

    The Payment Card Industry Data Security Standard is applicable to any organisation that stores, transmits or processes cardholder information.

    The Payment Card Industry Data Security Standard (PCI DSS) - is a worldwide security standard developed to protect cardholders' personal information. It includes requirements for security management, network architecture, software design, security policies and procedures, and other protection of customer account data. The standard is applicable to any organisation that stores, transmits or processes cardholder information.

    Each of PCI (Security Standards Council’s (SSC) founding payment brand members (American Express, Discover, JCB International, MasterCard and Visa) currently have their own PCI compliance programs for the protection of their affiliated payment card account data. Entities should contact the payment brands directly for information about their compliance programs.

    Questions regarding compliance requirements for payment card account data affiliated with other payment networks or brands should be referred to the applicable payment network or brand.

    Failure to be annually certified can become an issue if you have a security breach and your customers' card details are stolen. 

    Actions
    PCI Security Standards Council PCI DSS information
    Invest NI ICT support
    Also on this site
    Choose and manage a business bank account
    Create an online shop
    Using payment cards for your business
    Content category
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    Source URL

    /content/payment-card-industry-data-security-standard-compliance

    Links

  • Selecting the best online payment option

    Choosing between internet merchant accounts, payment-processing companies and online shopping malls.

    You can use the following scenarios to help you choose the best option for your business.

    Internet merchant account (IMA)

    Your business already accepts debit and credit card payments for face-to-face transactions. You expect a fairly high number of online transactions, most of which will be simple and low risk. You need the greatest amount of flexibility in operating your business and cashflow is very important. If this sounds like your business, then you should:

    Payment-processing company

    Your business will not have a large number of online transactions and you do not currently accept debit or credit card transactions so do not have an IMA. You have not been trading long and cannot provide a well-documented operations history.

    You value the ability to attract online sales more highly than the ability to collect sales income quickly. Your business will need some flexibility in the way in which it designs and operates its website, so you should:

    Online marketplace

    Your business is small, you do not currently offer debit or credit card sales and you have very limited IT skills. Your products are fairly standardised and easily understood. You are prepared to pay higher transaction and fixed costs just to establish a web presence.

    If this applies to your business, you should:

    Actions
    Invest NI ICT support
    Also on this site
    Choose and manage a business bank account
    Selling through online marketplaces
    Using payment cards for your business
    Content category
    Finance

    Source URL

    /content/selecting-best-online-payment-option

    Links

  • Set up an internet merchant account

    Internet merchant accounts and the issues to consider when setting them up.

    An internet merchant account (IMA) is a type of account that enables you to accept customers' credit and debit card payments directly online.

    There are other ways of processing credit and debit card payments for online sales, including online payment processing services, and online market places. These also enable you to receive payment from customers. Make sure you check any ongoing charges, such as monthly fees and transaction charges.

    For more information see: 

    Several banks and processors offer IMAs. These are referred to as merchant acquirers or acquiring banks - see find a bank to process your online payments.

    Even if you already have a merchant account for face-to-face transactions, you will still need one specifically to accept online payments directly from customers' credit or debit cards.

    Card users will visit your internet shop to order your goods or services and make payments, and the funds will usually be in your bank account after three or four working days.

    Beware of fraud

    Online card payments are classed as 'card-not-present' transactions, because you can't physically check the card or the cardholder. If a transaction proves to be fraudulent, the money will be reclaimed from your bank account - this is known as a chargeback. Even if a card-not-present transaction is authorised by the cardholder's bank, this doesn't necessarily guarantee payment.

    To help guard against fraud, where a cardholder claims that they did not authorise a payment, check to see if your online payment card processor can offer the card scheme's authentication service - MasterCard SecureCode and Verified by Visa.

    The costs

    Acquiring banks may charge for their services. There may be a sign-up fee and day-to-day charges may be a fixed fee in the case of debit card transactions or a percentage of each transaction for credit cards.

    In addition, where you are using a payment service provider, they will charge you for their service.

    Actions
    Invest NI ICT support
    Also on this site
    Choose and manage a business bank account
    Create an online shop
    Using payment cards for your business
    Content category
    Finance

    Source URL

    /content/set-internet-merchant-account

    Links

  • Find a bank to process your online payments

    Finding acquiring banks that offer internet merchant accounts.

    Online payments are processed by acquiring banks where businesses can open an internet merchant account (IMA). These banks include:

    • Barclaycard Business
    • HSBC
    • Lloyds Banking Group
    • NatWest/Royal Bank of Scotland
    • Ulster Bank

    The following charge-card companies also act as acquiring banks:

    • American Express
    • Diners Club

    American Express and Diners Club will only accept payments from their own cards.

    The acquiring banks have strict requirements and it's possible that even the bank you use for your business current account may refuse you - see checklist: applying for an internet merchant account. Alternatively, there are other IMA providers that you can find online.

    Once the IMA has been set up, secure socket layer (SSL) technology is used to encrypt transaction data and to send the necessary customer and card details to the acquiring bank in order to authorise the purchase. You should, therefore, ensure that any web-hosting solution you are considering can support the HTTPS SSL protocol.

    General Data Protection Regulation (GDPR)

    Under GDPR, the Information Commissioner's Office can issue fines for data security breaches. The size of the fine will depend on the size and scope of the breach, if the breach was deliberate or accidental, the affected organisation's finances and how much trouble the breach caused.

    See GDPR penalties and fines.

    In order to help reduce security breaches, organisations need to comply with the Payment Card Industry Data Security Standard - see Payment Card Industry Data Security Standard compliance.

    Actions
    Invest NI ICT support
    Also on this site
    Choose and manage a business bank account
    Create an online shop
    Develop a digital marketing plan
    Using payment cards for your business
    Content category
    Finance

    Source URL

    /content/find-bank-process-your-online-payments

    Links

  • Checklist: applying for an internet merchant account

    The requirements you will need to satisfy when applying to a bank for an internet merchant account.

    Banks that offer internet merchant accounts (IMAs) for accepting card payments have strict requirements. When you apply for an IMA, the bank will want to know certain details about you and your business.

    You will need to:

    • outline your business plan - including details of your cashflow and how you'll promote your online activities
    • supply your website address
    • explain the details of your product or service
    • give your suppliers' details
    • describe how you will deliver your product or service
    • set out your terms and conditions for online trading
    • work out your expected average online transaction values, your estimated turnover from online sales and your predicted number of credit and debit card transactions
    • provide details of the secure server you'll use
    • make your audited business accounts available
    • supply your bank details and provide authority to the bank to carry out a check with credit reference agencies
    • detail your trading history
    • provide information about the directors or partners in the business - including full contact details
    Actions
    Invest NI ICT support
    Also on this site
    Choose and manage a business bank account
    Create an online shop
    Using payment cards for your business
    Cashflow management
    Content category
    Finance

    Source URL

    /content/checklist-applying-internet-merchant-account

    Links

  • Advantages and disadvantages of using a payment-processing company

    Using payment-processing companies to handle online card transactions has advantages, but it is also worthwhile to consider the disadvantages.

    Payment-processing companies obtain payment from your customers' credit and debit cards on your behalf and forward the money to you.

    They offer a useful alternative for businesses who have a smaller turnover from card transactions or who can't open an internet merchant account (IMA) with an acquiring bank. Examples include PayPal, Shopify and Worldpay.

    Advantages of using a payment-processing company

    Some of the potential benefits are summarised below:

    • Payment-processing companies relieve you of the administrative burden of managing customers' card details and running an IMA.
    • They save you from having to set up secure payment systems.
    • They have less strict application procedures than an IMA requires. For example, you'll not usually be required to supply the same level of detailed information about your business plan, trading history and suppliers.
    • Your application can be processed much more quickly than for an IMA.

    Disadvantages of using a payment-processing company

    There can be drawbacks to using a payment-processing company - consider the following:

    • Customers can see that the payment is not going directly to you even though they may be conducting the transaction through your website.
    • Payment-processing companies may hold payments for a settlement period of 30-60 days before the money reaches your account.
    • Charges are generally higher than for an IMA. However, costs are falling and the market for these services is competitive.
    • If a card is used fraudulently, the value of the transaction will be reclaimed from your business. However, you may be able to get insurance to cover this risk.
    Actions
    Invest NI ICT support
    Also on this site
    Create an online shop
    Using payment cards for your business
    Content category
    Finance

    Source URL

    /content/advantages-and-disadvantages-using-payment-processing-company

    Links

  • Advantages and disadvantages of selling through online marketplaces

    Using an online marketplace for your business has many advantages, but it is also worthwhile to consider the disadvantages.

    An online marketplace can be a good alternative if:

    • you're looking for an online route to customers as an optional extra to your normal sales channels
    • you want to extend the number of online outlets your customers can use

    An online marketplace brings together a number of online shops on the same website, often from the same sector. It hosts your online shop and processes payments for you. Examples include Amazon and eBay.

    Marketplaces will often provide software to help you set up your shop and receive card payments on your behalf. You maintain and update your own shop within the market place, but most of the administration is done for you.

    Many internet service providers offer online mall facilities, as do specialist companies. If you sell to a particular trade or industry, the relevant trade association may be able to put you in touch with a dedicated mall.

    The Trade Association Forum (TAF) provides a directory of trade associations.

    Advantages of selling through online marketplaces

    Online marketplaces can be a great opportunity for some businesses, the advantages include:

    • Online shopping market places give an immediate online presence.
    • Sector-specific marketplaces can provide an effective route to your target market.
    • They allow new opportunities for overseas sales.
    • They're easy to set up for people with moderate IT skills.
    • You don't need to go through the process of setting up an internet merchant account.
    • You often get help and support in getting your store operational.

    Disadvantages of selling through online marketplaces

    It is worthwhile to consider the disadvantages that come with using online marketplaces for your business:

    • Online marketplaces may often be an expensive way to sell online.
    • Generally you'll have to pay a fee and a percentage of each transaction made through the marketplace - charges per transaction can be higher than processing payments yourself.
    • You may also have to pay a monthly or annual fee - charges vary substantially.
    • Your shop is often tied into a standard format.

    Read further guidance on selling through online marketplaces.

    Actions
    Invest NI ICT support
    Also on this site
    Create an online shop
    Choose an internet service provider for your business
    Content category
    Finance

    Source URL

    /content/advantages-and-disadvantages-selling-through-online-marketplaces

    Links

  • Advantages and disadvantages of using cryptocurrency

    Cryptocurrency has advantages and disadvantages for businesses with a reduction in intermediary fees balanced against vulnerability to scams.

    Cryptocurrency is a digital version of money that takes the form of virtual tokens or coins. You can use it to buy or sell items from people or companies that accept such payments.

    There are a range of cryptocurrencies available including, Bitcoin, Ethereum, Litecoin and Cardano, each with individual values and rules. Bitcoin is currently the most widely used.

    To make a Bitcoin payment, Bitcoins are transferred from a digital wallet, which are obtained when you buy the currency from a crypto exchange, to someone else’s using an app or website and the person’s unique Bitcoin address.

    Advantages of using cryptocurrency

    Using cryptocurrency could offer opportunities for some businesses. The benefits may include:

    • A cryptocurrency transaction is generally a quick and straightforward process. For example, Bitcoins can be transferred from one digital wallet to another, using only a smartphone or computer.
    • Every cryptocurrency transaction is recorded in a public list called the blockchain, which is the technology that enables its existence. This makes it possible to trace the history of Bitcoins to stop people from spending coins they do not own, making copies or undoing transactions.
    • Blockchain aims to cut out intermediaries, such as banks and online marketplaces, which means there are no payment processing fees.
    • Cyptocurrency payments are becoming more widely used, amongst large organisations, and in sectors including fashion and pharmaceuticals.

    Disadvantages of using cryptocurrency

    There are some business disadvantages to using cryptocurrency:

    • It is possible to lose your virtual wallet or delete your currency. There have also been thefts from websites that let you store your cryptocurrency remotely.
    • The value of cryptocurrencies such as Bitcoins can change significantly, so some people don't feel it is safe to turn 'real' money into Bitcoins.
    • The Financial Conduct Authority (FCA) has oversight to check that cryptocurrency organisations have effective anti-money laundering and terrorist financing procedures in place, but generally cryptocurrency exchanges themselves are not regulated.
    • If companies or consumers move to a new cryptocurrency from you or stop using digital currencies entirely, it could lose value and become worthless.
    • Cryptocurrency exchanges are targets of cyber attacks, which could lead to an irreparable loss of your investment.
    • Cryptocurrency can be vulnerable to scams or used as a payment mechanism of a scam. Scammers often use platforms like Facebook, Instagram and X (formerly known as Twitter) to trick people into these investments. If you suspect you’ve been targeted, it's important to report this to Action Fraud as soon as possible. Read more on how to report a cyber crime.

    Cryptocurrency can be a risky investment and you should only consider investing if you're financially equipped and willing to lose any money that you put into it.

    Read further guidance on cyber security for business.

    Actions
    Cryptocurrency guidance
    Also on this site
    How to report a cyber crime
    Content category
    Finance

    Source URL

    /content/advantages-and-disadvantages-using-cryptocurrency

    Links

Online payment jargon

In this guide:

  • Online payment jargon

    The key concepts in online debit and credit card payments.

    Debit and credit card payments and their application online involve some key concepts and jargon.

    Acquirers

    An acquirer can be a high street bank or other financial institution that offers credit and debit card accepting/processing services. It acquires the money from the customer, processes the transaction and credits your account.

    Internet merchant accounts (IMAs)

    You need to apply for a merchant service agreement if you want a bank to handle your electronic payments. For web-based online transactions you need an IMA.

    Obtaining an IMA from an acquirer may be quicker and easier if you already have 'offline' card-processing facilities set up. In this case, just ask your acquirer for an additional IMA ID for use exclusively with internet transactions. This process is normally quick, especially if the risk to your business does not change.

    Payment service providers (PSPs)

    A PSP will provide you with a 'virtual' till or terminal that collects card details over the internet and passes them to the acquiring bank. To take electronic payments over the web, you will need a PSP.

    Your choice of PSP will depend on its cost and compatibility with your chosen e-commerce software solution. 

    Some acquiring banks offer PSP services as part of their product and there are other less expensive options available.

    Actions
    Take Five to Stop Fraud business advice
    Invest NI ICT support
    Also on this site
    Choose and manage a business bank account
    Create an online shop
    Using payment cards for your business
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    Finance

    Source URL

    /content/online-payment-jargon

    Links

  • Payment Card Industry Data Security Standard compliance

    The Payment Card Industry Data Security Standard is applicable to any organisation that stores, transmits or processes cardholder information.

    The Payment Card Industry Data Security Standard (PCI DSS) - is a worldwide security standard developed to protect cardholders' personal information. It includes requirements for security management, network architecture, software design, security policies and procedures, and other protection of customer account data. The standard is applicable to any organisation that stores, transmits or processes cardholder information.

    Each of PCI (Security Standards Council’s (SSC) founding payment brand members (American Express, Discover, JCB International, MasterCard and Visa) currently have their own PCI compliance programs for the protection of their affiliated payment card account data. Entities should contact the payment brands directly for information about their compliance programs.

    Questions regarding compliance requirements for payment card account data affiliated with other payment networks or brands should be referred to the applicable payment network or brand.

    Failure to be annually certified can become an issue if you have a security breach and your customers' card details are stolen. 

    Actions
    PCI Security Standards Council PCI DSS information
    Invest NI ICT support
    Also on this site
    Choose and manage a business bank account
    Create an online shop
    Using payment cards for your business
    Content category
    Finance

    Source URL

    /content/payment-card-industry-data-security-standard-compliance

    Links

  • Selecting the best online payment option

    Choosing between internet merchant accounts, payment-processing companies and online shopping malls.

    You can use the following scenarios to help you choose the best option for your business.

    Internet merchant account (IMA)

    Your business already accepts debit and credit card payments for face-to-face transactions. You expect a fairly high number of online transactions, most of which will be simple and low risk. You need the greatest amount of flexibility in operating your business and cashflow is very important. If this sounds like your business, then you should:

    Payment-processing company

    Your business will not have a large number of online transactions and you do not currently accept debit or credit card transactions so do not have an IMA. You have not been trading long and cannot provide a well-documented operations history.

    You value the ability to attract online sales more highly than the ability to collect sales income quickly. Your business will need some flexibility in the way in which it designs and operates its website, so you should:

    Online marketplace

    Your business is small, you do not currently offer debit or credit card sales and you have very limited IT skills. Your products are fairly standardised and easily understood. You are prepared to pay higher transaction and fixed costs just to establish a web presence.

    If this applies to your business, you should:

    Actions
    Invest NI ICT support
    Also on this site
    Choose and manage a business bank account
    Selling through online marketplaces
    Using payment cards for your business
    Content category
    Finance

    Source URL

    /content/selecting-best-online-payment-option

    Links

  • Set up an internet merchant account

    Internet merchant accounts and the issues to consider when setting them up.

    An internet merchant account (IMA) is a type of account that enables you to accept customers' credit and debit card payments directly online.

    There are other ways of processing credit and debit card payments for online sales, including online payment processing services, and online market places. These also enable you to receive payment from customers. Make sure you check any ongoing charges, such as monthly fees and transaction charges.

    For more information see: 

    Several banks and processors offer IMAs. These are referred to as merchant acquirers or acquiring banks - see find a bank to process your online payments.

    Even if you already have a merchant account for face-to-face transactions, you will still need one specifically to accept online payments directly from customers' credit or debit cards.

    Card users will visit your internet shop to order your goods or services and make payments, and the funds will usually be in your bank account after three or four working days.

    Beware of fraud

    Online card payments are classed as 'card-not-present' transactions, because you can't physically check the card or the cardholder. If a transaction proves to be fraudulent, the money will be reclaimed from your bank account - this is known as a chargeback. Even if a card-not-present transaction is authorised by the cardholder's bank, this doesn't necessarily guarantee payment.

    To help guard against fraud, where a cardholder claims that they did not authorise a payment, check to see if your online payment card processor can offer the card scheme's authentication service - MasterCard SecureCode and Verified by Visa.

    The costs

    Acquiring banks may charge for their services. There may be a sign-up fee and day-to-day charges may be a fixed fee in the case of debit card transactions or a percentage of each transaction for credit cards.

    In addition, where you are using a payment service provider, they will charge you for their service.

    Actions
    Invest NI ICT support
    Also on this site
    Choose and manage a business bank account
    Create an online shop
    Using payment cards for your business
    Content category
    Finance

    Source URL

    /content/set-internet-merchant-account

    Links

  • Find a bank to process your online payments

    Finding acquiring banks that offer internet merchant accounts.

    Online payments are processed by acquiring banks where businesses can open an internet merchant account (IMA). These banks include:

    • Barclaycard Business
    • HSBC
    • Lloyds Banking Group
    • NatWest/Royal Bank of Scotland
    • Ulster Bank

    The following charge-card companies also act as acquiring banks:

    • American Express
    • Diners Club

    American Express and Diners Club will only accept payments from their own cards.

    The acquiring banks have strict requirements and it's possible that even the bank you use for your business current account may refuse you - see checklist: applying for an internet merchant account. Alternatively, there are other IMA providers that you can find online.

    Once the IMA has been set up, secure socket layer (SSL) technology is used to encrypt transaction data and to send the necessary customer and card details to the acquiring bank in order to authorise the purchase. You should, therefore, ensure that any web-hosting solution you are considering can support the HTTPS SSL protocol.

    General Data Protection Regulation (GDPR)

    Under GDPR, the Information Commissioner's Office can issue fines for data security breaches. The size of the fine will depend on the size and scope of the breach, if the breach was deliberate or accidental, the affected organisation's finances and how much trouble the breach caused.

    See GDPR penalties and fines.

    In order to help reduce security breaches, organisations need to comply with the Payment Card Industry Data Security Standard - see Payment Card Industry Data Security Standard compliance.

    Actions
    Invest NI ICT support
    Also on this site
    Choose and manage a business bank account
    Create an online shop
    Develop a digital marketing plan
    Using payment cards for your business
    Content category
    Finance

    Source URL

    /content/find-bank-process-your-online-payments

    Links

  • Checklist: applying for an internet merchant account

    The requirements you will need to satisfy when applying to a bank for an internet merchant account.

    Banks that offer internet merchant accounts (IMAs) for accepting card payments have strict requirements. When you apply for an IMA, the bank will want to know certain details about you and your business.

    You will need to:

    • outline your business plan - including details of your cashflow and how you'll promote your online activities
    • supply your website address
    • explain the details of your product or service
    • give your suppliers' details
    • describe how you will deliver your product or service
    • set out your terms and conditions for online trading
    • work out your expected average online transaction values, your estimated turnover from online sales and your predicted number of credit and debit card transactions
    • provide details of the secure server you'll use
    • make your audited business accounts available
    • supply your bank details and provide authority to the bank to carry out a check with credit reference agencies
    • detail your trading history
    • provide information about the directors or partners in the business - including full contact details
    Actions
    Invest NI ICT support
    Also on this site
    Choose and manage a business bank account
    Create an online shop
    Using payment cards for your business
    Cashflow management
    Content category
    Finance

    Source URL

    /content/checklist-applying-internet-merchant-account

    Links

  • Advantages and disadvantages of using a payment-processing company

    Using payment-processing companies to handle online card transactions has advantages, but it is also worthwhile to consider the disadvantages.

    Payment-processing companies obtain payment from your customers' credit and debit cards on your behalf and forward the money to you.

    They offer a useful alternative for businesses who have a smaller turnover from card transactions or who can't open an internet merchant account (IMA) with an acquiring bank. Examples include PayPal, Shopify and Worldpay.

    Advantages of using a payment-processing company

    Some of the potential benefits are summarised below:

    • Payment-processing companies relieve you of the administrative burden of managing customers' card details and running an IMA.
    • They save you from having to set up secure payment systems.
    • They have less strict application procedures than an IMA requires. For example, you'll not usually be required to supply the same level of detailed information about your business plan, trading history and suppliers.
    • Your application can be processed much more quickly than for an IMA.

    Disadvantages of using a payment-processing company

    There can be drawbacks to using a payment-processing company - consider the following:

    • Customers can see that the payment is not going directly to you even though they may be conducting the transaction through your website.
    • Payment-processing companies may hold payments for a settlement period of 30-60 days before the money reaches your account.
    • Charges are generally higher than for an IMA. However, costs are falling and the market for these services is competitive.
    • If a card is used fraudulently, the value of the transaction will be reclaimed from your business. However, you may be able to get insurance to cover this risk.
    Actions
    Invest NI ICT support
    Also on this site
    Create an online shop
    Using payment cards for your business
    Content category
    Finance

    Source URL

    /content/advantages-and-disadvantages-using-payment-processing-company

    Links

  • Advantages and disadvantages of selling through online marketplaces

    Using an online marketplace for your business has many advantages, but it is also worthwhile to consider the disadvantages.

    An online marketplace can be a good alternative if:

    • you're looking for an online route to customers as an optional extra to your normal sales channels
    • you want to extend the number of online outlets your customers can use

    An online marketplace brings together a number of online shops on the same website, often from the same sector. It hosts your online shop and processes payments for you. Examples include Amazon and eBay.

    Marketplaces will often provide software to help you set up your shop and receive card payments on your behalf. You maintain and update your own shop within the market place, but most of the administration is done for you.

    Many internet service providers offer online mall facilities, as do specialist companies. If you sell to a particular trade or industry, the relevant trade association may be able to put you in touch with a dedicated mall.

    The Trade Association Forum (TAF) provides a directory of trade associations.

    Advantages of selling through online marketplaces

    Online marketplaces can be a great opportunity for some businesses, the advantages include:

    • Online shopping market places give an immediate online presence.
    • Sector-specific marketplaces can provide an effective route to your target market.
    • They allow new opportunities for overseas sales.
    • They're easy to set up for people with moderate IT skills.
    • You don't need to go through the process of setting up an internet merchant account.
    • You often get help and support in getting your store operational.

    Disadvantages of selling through online marketplaces

    It is worthwhile to consider the disadvantages that come with using online marketplaces for your business:

    • Online marketplaces may often be an expensive way to sell online.
    • Generally you'll have to pay a fee and a percentage of each transaction made through the marketplace - charges per transaction can be higher than processing payments yourself.
    • You may also have to pay a monthly or annual fee - charges vary substantially.
    • Your shop is often tied into a standard format.

    Read further guidance on selling through online marketplaces.

    Actions
    Invest NI ICT support
    Also on this site
    Create an online shop
    Choose an internet service provider for your business
    Content category
    Finance

    Source URL

    /content/advantages-and-disadvantages-selling-through-online-marketplaces

    Links

  • Advantages and disadvantages of using cryptocurrency

    Cryptocurrency has advantages and disadvantages for businesses with a reduction in intermediary fees balanced against vulnerability to scams.

    Cryptocurrency is a digital version of money that takes the form of virtual tokens or coins. You can use it to buy or sell items from people or companies that accept such payments.

    There are a range of cryptocurrencies available including, Bitcoin, Ethereum, Litecoin and Cardano, each with individual values and rules. Bitcoin is currently the most widely used.

    To make a Bitcoin payment, Bitcoins are transferred from a digital wallet, which are obtained when you buy the currency from a crypto exchange, to someone else’s using an app or website and the person’s unique Bitcoin address.

    Advantages of using cryptocurrency

    Using cryptocurrency could offer opportunities for some businesses. The benefits may include:

    • A cryptocurrency transaction is generally a quick and straightforward process. For example, Bitcoins can be transferred from one digital wallet to another, using only a smartphone or computer.
    • Every cryptocurrency transaction is recorded in a public list called the blockchain, which is the technology that enables its existence. This makes it possible to trace the history of Bitcoins to stop people from spending coins they do not own, making copies or undoing transactions.
    • Blockchain aims to cut out intermediaries, such as banks and online marketplaces, which means there are no payment processing fees.
    • Cyptocurrency payments are becoming more widely used, amongst large organisations, and in sectors including fashion and pharmaceuticals.

    Disadvantages of using cryptocurrency

    There are some business disadvantages to using cryptocurrency:

    • It is possible to lose your virtual wallet or delete your currency. There have also been thefts from websites that let you store your cryptocurrency remotely.
    • The value of cryptocurrencies such as Bitcoins can change significantly, so some people don't feel it is safe to turn 'real' money into Bitcoins.
    • The Financial Conduct Authority (FCA) has oversight to check that cryptocurrency organisations have effective anti-money laundering and terrorist financing procedures in place, but generally cryptocurrency exchanges themselves are not regulated.
    • If companies or consumers move to a new cryptocurrency from you or stop using digital currencies entirely, it could lose value and become worthless.
    • Cryptocurrency exchanges are targets of cyber attacks, which could lead to an irreparable loss of your investment.
    • Cryptocurrency can be vulnerable to scams or used as a payment mechanism of a scam. Scammers often use platforms like Facebook, Instagram and X (formerly known as Twitter) to trick people into these investments. If you suspect you’ve been targeted, it's important to report this to Action Fraud as soon as possible. Read more on how to report a cyber crime.

    Cryptocurrency can be a risky investment and you should only consider investing if you're financially equipped and willing to lose any money that you put into it.

    Read further guidance on cyber security for business.

    Actions
    Cryptocurrency guidance
    Also on this site
    How to report a cyber crime
    Content category
    Finance

    Source URL

    /content/advantages-and-disadvantages-using-cryptocurrency

    Links

Non-bank funding for short and long-term use

In this guide:

  • Eight types of non-bank financial support

    The main types of non-bank financial support for businesses including non-banking financial institutions and equity finance.

    Although it is common for people in business to approach banks for finance, there are other options available that may be a better fit for your business. Non-bank lenders may have lower interest rates and charges, and be able to make loans over a longer period than a bank. They can also be less restrictive about high loan to value and issues like poor credit rating or experience of recent losses.

    It is important you read all agreements carefully before you borrow from a non-bank lender and find out if any assets will be required as security.

    If you are interested in obtaining finance from a non-bank lender, consider the following:

    1. Commercial loan providers

    Commercial loan providers - also known as non-banking financial institutions - are organisations that provide financial services like loans and credit facilities, but don't have a banker's licence. This means they cannot take deposits from the public or offer normal banking facilities such as overdrafts. However, they can have less restrictive lending criteria and may be a useful and competitive source of funding.

    Commercial loan providers in Northern Ireland include:

    2. Social and community lending

    You may be able to borrow money from a credit union which is likely to be more affordable than a bank loan. There are also various lenders that offer loans to disadvantaged groups, community businesses and social enterprises. See social and community lenders.

    3. Joint ventures and partnerships

    One way to increase resources is to enter into a joint venture with another business. This can offer many advantages - such as increased capacity, access to new markets and the availability of greater technical expertise. See joint ventures and business partnerships.

    4. Factoring and invoice discounting

    It may be possible for you to raise funds against unpaid invoices. Invoice discounting, factoring or supplier finance can all be useful methods to improve your business' cashflow. See factoring and invoice discounting.

    5. Equity finance

    You could sell shares in your business if you want to raise long-term finance. This would mean you won't have to repay the debt or pay interest, but it will involve partly giving some ownership of your business and its future profits. There are various sources of equity finance, including venture capital, the stock market and business angles. See equity finance.

    6. Crowdfunding

    Crowdfunding is where a number of people each invest, lend or contribute small amounts of money to your business or idea. If you seek funds this way, you would typically set up a profile of your project on your website then use social media and various networks of business, family and friends to raise the money. See crowdfunding.

    7. Family and friends

    Family and friends can offer credit on a flexible, long-term and low-cost (or free) basis. You should make sure that the terms of any loan are clearly understood by both parties. See financing from friends and family.

    8. Government financial support

    If your small business is struggling to access bank finance, there is a government scheme in which the UK's biggest banks will pass on details of any businesses they have rejected to alternative finance providers. These are:

    If your business is new or expanding, you could be eligible for business development grants or other government support schemes. See grants and government support.

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  • Social and community lenders

    Applying for business loans from credit unions, the Prince's Trust and co-operative and community finance.

    Social lenders are generally non-profit making organisations that can offer loans and credit.

    Co-operative and community finance

    Employee-owned or community businesses can apply to borrow money from the Industrial Common Ownership Finance Fund. Eligible organisations include social enterprises, co-operatives, development trusts and charitable businesses.

    Find out about loan eligibility with Co-operative and Community Finance (Coop).

    Credit unions

    Credit unions offer loans that are accessible and affordable. They are owned and controlled by their members. This means they have to make decisions that are in members' best interests, rather than to make money for external shareholders. There are also no penalties for repaying loans early.

    Find out about credit union loans with the Association of British Credit Unions Limited (ABCUL).

    The Prince's Trust

    If you are aged between 18 and 30, you may be able to get financial support from the Prince's Trust. The charity's Enterprise Programme provides loans, grants and advice so that disadvantaged young people can start their own businesses. To be eligible, you need to be unemployed and unable to raise all the finance you need from other sources. Read about the Prince's Trust Enterprise Programme.

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  • Non-bank funding for short and long-term use

    Where you can find short and long-term business finance from non-bank providers.

    There are alternatives to standard business loans that you may find are more suitable for your needs - particularly if you need the money for a long or short period. Some of these options are also available from banks. Your type of business and its current needs will determine the choice of provider.

    Short-term funding

    If you have a temporary cashflow problem, eg non-payment from a creditor, short-term funding may be able to help. Short-term funding sources include credit cards, payday loans and invoice finance.

    Credit cards are available from building societies as well as banks, and these can be used to make business purchases using credit. However, it is important that you keep track of your credit card spending, as it is among the most expensive forms of credit - see types of payment cards available.

    Payday loans are very short-term loans that can be applied for online or over the telephone. Interest is calculated on the amount you borrow and the agreed repayment date, which can range from one day to a maximum of one month. Rates of interest can be high, especially when compared by APR, but can be cheaper than an unarranged overdraft. You should always check that the lender is reputable.

    Invoice finance offers ways to access working capital by unlocking the value of invoices - although interest rates and charges apply on the cash advanced. There are three main types of invoice finance:

    • invoice discounting - this allows you to draw on funding secured against approved invoices
    • factoring - this involves you selling your invoices to your financier for them to process
    • supplier finance, also known as 'supply chain finance' or 'reverse factoring' - if your buyer offers this it can give the same benefits as factoring, but usually at a much lower cost

    See factoring and invoice discounting.

    Long-term funding

    If you are looking to expand your business or fund a new product or service, longer-term funding and investment can help. Non-bank investors can be a good source for small businesses, as many are prepared to lend to riskier ventures, such as start-ups.

    Equity finance can provide investment in exchange for a share of the company or its future profits. This could be through business angel or venture capital investment, or by issuing shares in your business - perhaps to family, friends or employees.

    For more information, see:

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  • Obtaining non-bank investment

    How to secure an investment for your business by preparing for a lender's requirements.

    Before approaching a non-bank investor, you should make sure your business is investment ready by:

    • keeping yourself well informed about your business finances
    • having an up-to-date business plan
    • being clear about the amount of money you require and what it will be used for
    • carrying out market research to demonstrate that there's a market for the products or services that you intend to sell
    • producing cash flow projections for the next 12 months to show that you will be able to afford repayments, including interest and fees
    • carrying out a SWOT analysis (strengths, weaknesses, opportunities and threats relating to your business)
    • ensuring your business and personal credit ratings are up to date and error-free

    For more information, see measure performance and set targets.

    Getting the best deal

    When looking for finance for your business, it is important that you choose the option that best suits your business - see business financing options - an overview.

    You should compare different providers of non-bank finance - if necessary using a finance broker - and always read and research the small print of any investment offers.

    Loan guarantees

    Most non-bank lenders will ask you for some form of guarantee before granting a loan. This could include assets such as property owned by the business. You may also be required to ask another person or another business to act as a guarantor and guarantee the loan. The guarantee means that the lender will claim from the guarantor if your business cannot meet the repayments.

    Some lenders will also require personal guarantees - eg from your board of directors or business backers.

    Many loan providers require you to take out loan repayment insurance to cover repayments if your business meets cashflow problems.

    For more information, see providing a guarantee for your loan.

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  • Avoiding loan sharks to fund your business

    Advice on how to spot unlicensed lenders and why you shouldn't borrow money from them.

    Take care to avoid unauthorised lenders - otherwise known as loan sharks. An unauthorised lender may give you quick access to credit, possibly without needing a business plan or security, but there may be drawbacks including unfavourable interest rates and loan terms.

    To find out if a lender is licensed by the Financial Conduct Authority (FCA) you can search the Financial Services Register.

    You may be dealing with a loan shark if:

    • the salesperson is pestering you or is particularly pushy
    • the interest rate is significantly higher than other lenders
    • the company is reluctant to show you the loan terms and conditions
    • you are asked to tie yourself into a longer-term contract than you need

    You may also find yourself a target for loan sharks if you have a poor credit record and would normally find it difficult to raise finance. Read GOV.UK guidance on loan sharks.

    For information on how you may be able to secure non-bank finance, see eight types of non-bank financial support.

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  • Non-bank finance

    Raising finance for our business - See.Sense. (video)

    See.Sense co-founders Philip and Irene McAleese talk about how they used a successful crowdfunding campaign to bring their product to the marketplace.

    See.Sense. is an electronic systems design company specialising in cycling lighting and technology applications. See.Sense. wanted to bring a new intelligent bicycle light through production to market, and considered funding options to achieve this.

    See.Sense. co-founders Philip and Irene McAleese explain why crowdfunding was the perfect fit for their company and product, describe how early market testing and interaction with customers brought benefits to their design process, and talk through some of the benefits and potential drawbacks of a crowdfunding campaign.

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