Recent news from the SME Finance Monitor showed that over 70% of SMEs are now using external finance, which is an increase from 65% based on last year’s figures!

External financing is any kind of business funding you acquire from sources outside your company. This could be bank loans, crowdfunding initiatives, investments from private individuals or investment firms, grants and selling company shares. One of the key advantages of external funding is it allows you to use internal financial resources for other purposes, such as growth of the business or making other investments in new equipment, new premises or even taking on new staff.

With this increase in demand, for those seeking to obtain external funding it is important to make sure you understand the advantages and disadvantages associated with each of them and make sure you understand the implications for your business. This includes being certain of the terms of any loans being undertaken, investments obtained and the implications of selling shares in the company.

Loans are likely to need some form of security to be given to the lender in case of default, investors will be seeking a return on their investment and a sale of shares needs to be looked at carefully to ensure that the company does not end up in a position where it is being taken over by a third party or even a competitor.

With this obvious bloom in the market, we expect to also see an increase in private lenders drawing up contracts to loan money to SMEs or make investments, particularly where they can get a better return on their funds than having it sat in a bank account whilst inflation is low.

Here at Howlett Clarke, we are able to offer a wide range of services to both borrowers and lenders in connection with their corporate finance affairs.

For borrowers, we are able to review documentation received from lenders and investors, advise on security being requested including personal guarantees by directors, help to draw up appropriate investment agreements (including shareholder agreements) and assist with the issue or sale of shares in the company including drawing up the relevant paperwork to effect the same. For lenders and investors, we can help to draw up a variety of agreements to document your loan/investment on terms and advise on the possible security requirements for the same, including reviewing title to properties being offered as security, to ensure your position is protected.

If you have any questions relating to this article, head of our corporate team Stephanie Creasey, is on hand to help you. To find out more, give us a call on 01273 327272 or email stephaniecreasey@howlettclarke.co.uk For more information about the range of services we offer for businesses generally, please see here.