Many businesses in this situation will look for equity investment from angel investors or possibly some form of funding from the Government.
They may even try the banks, although likely with little success.
One source of funding that is becoming increasingly popular for profitable and growing businesses is crowdfunding.
Once a business has started to trade profitably, assets owned – such as a patent – have an increasing value against which the company may be able to obtain debt finance, which is used as security.
In the last two years there has been a proliferation of crowdfunding platforms from which there have been an increasing number of investors providing loans secured against company assets.
Each platform has its own business model, but they are all generally flexible in their approach and quick in their decision making.
Whilst the interest rates charged are often up to 10%, which can be regarded as expensive, when compared to the cost of giving up equity in the business, crowdfunded loans are much cheaper and avoid the potential difficulty of buying back the equity at a later date.