Innovative start up financing methods  Invoice discounting

Innovative start up financing methods

Bank lending to small and medium-sized businesses might have slowed down considerably but thanks to recent innovations there are a number of creative new ways that start-ups can use to obtain finance.

According to recent figures, small businesses are getting their hands on more than £1 million every day by embracing alternative sources of finance; all it requires is a little bit of imagination and some out-of-the-box thinking.


Crowdfunding is becoming increasingly popular, but websites such as – described as Dragon’s Den without the drama – have taken the concept one step further. Applicants outline their idea via an online proposal form and create a video pitch, which will be promoted on their site and via social media.

The video can be uploaded without charge, or for £99 a panel of experts will provide detailed feedback so you can improve your proposition. Mentoring packages are also available where you can target a specific member of the team that you feel might be best suited to provide assistance for your project.

There are rapid changes occurring in the world of business; the internet and social platforms can be powerful tools if employed effectively.

The web dramatically increases the number of people who get to hear about your idea, so not only are you more likely to secure investment, but that investment is also more likely to come from someone who feels as passionate about your idea as you do.

For those who need a little more help, CrowdBnk could be worth considering. The website aims to match start-ups with investors and is useful for those would-be entrepreneurs who need a bit more assistance in shaping their business ideas. The website helps to formulate your plans with you before you present it to its bank of investors.

Potential investors sign up to the service and browse the site for likely investments. The entrepreneur sets a target amount up to a maximum of £10,000, which must be raised via one or several investors before the project can go ahead.

The majority of crowdfunding sites take a percentage fee of any project that successfully reaches its funding target, as well as an additional charge to cover costs; they generally don’t charge investors.

Using assets to generate capital

It’s possible for SMEs to generate capital based on their long-dated invoices. There are services which allow pool of professional investors to bid on your invoices, with the ‘winning’ bidder advancing the capital. When your customer pays the invoice, you provide a refund to the investor, plus fees.

Speed and control are the key features that attract businesses to this type of service, with the invoices put forward being selected solely by the business owner and the funds usually advanced in under 24 hours. 

Of course, if you’re not comfortable with the idea of giving others access to an insight into your company’s finances or you simply don’t have any blue-chip clients yet, your invoices are still capable of opening up a pool of finance. Factoring can help provide finance by making working capital available immediately.

Factoring can enable you access to up to 90 per cent of the value of your invoices in advance of them being paid. The factor will pay you an agreed amount of the value, and will take the remainder as the fee for their service, also handling the credit control of those invoices on behalf of your company saving you time and money.

The recession has forced businesses to get creative, and for start-up companies that’s great news. A wealth of options for raising capital is breathing new life into the sector.

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