Most businesses need to borrow money at some time and there are a wide range of choices available.  The first place to ask for external funds is usually your bank, but there are other options.  Bristol entrepreneurs can approach one of the funding agencies for a loan or may be able to join a credit union.  
 

Banks provide short-term finance in the form of overdrafts - usually restricted to supporting the needs of working capital (cash for day-to-day business operations).  Loans can provide medium-term finance.  Credit cards also provide a short period of credit, but interest rates tend to be high compared to an agreed bank loan. 

All bank borrowings normally attract interest so you should understand how much you need to repay and when payments will be taken and allow for this in your cash flow forecasts.  You can agree the best day in the month for repayments to be made.  Find out if repayments include capital as well as interest, or just interest.  If the latter, when must the capital be repaid? 

For UK businesses with an annual turnover of up to £5.6 million, the government will guarantee up to 75% of a loan from a bank or other financial institutions.  This will be subject to the borrower having a satisfactory credit rating.  Further details from the DTI Small Business Service or telephone 0845 001 0032/3.   

Leasing assets, such as vehicles and machinery, rather than an outright purchase can free-up working capital.  Here you hire the assests from a finance company, which can provide some tax benefits.  Long-term leasing, however, may mean that overall costs exceed that of an outright purchase.

Hire Purchase (HP) is another option, which enables you to purchase the asset on credit.  The cost is then paid off, with interest, over a specified period of time.

Members of a credit union invest money into the union on a regular basis and can then borrow money from the union at an affordable rate of interest.  Credit unions are normally local organisations. Advice regarding all aspects of credit union development in Bristol is available from Avon CDA and Social Enterprise Works.
 

BACEN and the Social Economy Development Project have brought together information on loans and other forms of community finance that are particularly suited to community businesses and social enterprises.  Contact Social Enterprise Works or CDA for a copy or download it from the SEBDP website