10 ways to... secure alternative forms of finance

1. A mortgage. This is the classic method of raising money to start up or develop a small business. A personal mortgage secured on your house is usually less expensive than a business loan secured by personal guarantee. It also means payments can be spread over a large number of years and that you don't have to justify your business plan to a lender.
2. A loan secured on an endowment policy. An endowment policy is a combined life assurance and investment policy, often taken out at the start of a mortgage to run for the same term (usually 25 years). Securing your loan against your endowment policy can be relatively inexpensive compared with a loan secured by a personal guarantee.
3. A credit card. Borrowing on a credit card is a very expensive option, but it can be useful in an emergency for relatively small amounts of money.
4. Factoring . Factoring allows you to convert your unpaid invoices into cash by selling them to a bank or factoring specialist. Both will typically pay you up to 80 per cent of the value of the invoice immediately. They pay you the remainder - minus any charges - after a specified period, or once the debt has been paid.
5. Leasing. Leasing provides a flexible method of funding business equipment, offering the benefits of use without many of the potential burdens of ownership.
6. Hire purchase. This is a straightforward repayment facility where (eventually) you own the asset. It allows you to get the equipment you need without parting with a large sum up front. Instead, the business pays monthly instalments for an agreed period and the financier retains ownership until the last payment, when ownership is transferred. However, hire purchase requires a long-term commitment and you might find it difficult to terminate the agreement early.
7. Venture capital. This is most suitable for fast-growing firms that are prepared to sell a stake in their business to raise finance (typically a minimum of £250,000 in equity). To attract investment from venture capital firms, you need to offer the strong possibility of a high return on investment. You also have to have a strong management team, a clean track record in your business and financial dealings and have a well thought-out exit plan for the investor. Most venture capitalists will expect to realise their profits within three to seven years.
8. Business Angels. These are wealthy individuals or groups of potential investors who invest in new or growing businesses in return for shares. If you're prepared to give up shares in your business for a lump sum - usually between £25,000 and £250,000 - you should consider approaching a business angel. You should know that such investors will want to scrutinise your business closely and expect some say in how it is run.
9. Friends and family. Asking friends and family for money might be the easiest route to raising money - but you need to handle the situation very carefully. You should show them your business plan and draw up a formal agreement so that it is legally binding. Should anything go wrong with your business, leaving you unable to repay the loan, the result could mean irreparable damage to your relationships with friends and family.
10. Grants. Grants are available to specified development projects through numerous government and charitable initiatives. They are available to all sectors for all kinds of projects and can range in value from £50 to more than £1 million. However, they are often match-funded, meaning the grant only meets half of your financial requirement - you have raise the rest.