All businesses need capital to expand and as such finding funding can be difficult for SMEs. Some expand by bootstrapping – the notion that you funnel profits into growth. Some expand by lending – borrowing now to grow tomorrow. This article will highlight the obvious and the not so obvious ways in which you could grow your business when traditional means aren’t always available.
Small companies are more and more reluctant to borrow from high street banks. The British Business Bank analysis found that microbusinesses and SMEs were reluctant to borrow and that this approach had become “entrenched” in recent years.
There is a reason for this entrenchment – post-2007 banking crisis saw Governments funnel billions into banks on the proviso they lent to small businesses – they didn’t, or they made the requirements even more stringent. This has created a long-term distrust between small businesses and high street banks.
However, businesses need capital to grow. This article will explore alternative avenues for growth that by-passes the traditional high street means.
Finding Funding – Your First Steps
When starting or growing a business it can be incredibly difficult to find the right capital needs for growth. For start-ups the costs are massive – from stock, equipment to marketing all of which doesn’t come cheap.
For the growing microbusiness, taking those big next steps can be cumbersome and expensive. Getting your cash in hand in order allows you to both focus on the day-to-day needs and the long-term goals.
Self-Funding or Family Funding
This is the first ‘port-of-call’ for any business or start-up. Using your own savings or personal equity can help give you the boost you need to grow. Re-mortgaging a home is a popular means to fund growth for the self-employed. However, you should know that you home is at risk if your business fails and you cannot make repayments.
However, your familial network could open alternative avenues for growth. Remember, it can be awkward to ask friends and family for money. Their hard-earned cash is important to them and their own families. Therefore, you should always be respectful, have a solid plan, an easy-to-understand repayment plan/schedule and ask them to play an active part as investors. Finding funding within your circle of family or friends could be your avenue for growth.
Lots of start-ups, especially in crafts or digital creative media are crowdfunding their businesses. They start with a great idea, build a concept and then utilise platforms like IndieGoGo, Kickstarter or Patreon to engage with millions of potential funders whilst utilising the viral power of social media to help blitz market their ideas. Using the power of crowdfunding could be your avenue to finding funding and the right platform for growth?
Alternative Lending (Pay Day Loans)
This isn’t an advisable route but there are examples of people borrowing from platforms like Provident Personal Credit to setup window cleaning or house cleaning businesses that are cash-based businesses that allow you the scope to grow through bootstrapping. However, this is an incredibly risky avenue of business funding with an incredibly high APR rate.
Angel Investor Networks
Angel Investors are high net worth individuals (rich people) who have disposable funds available to invest in new or growing businesses. They often ‘club together’ and form Angel Investor Networks like London Investor Club or Master Investor Sheffield. If you have a sound business plan, a good business team, and the potential to grow why not approach a business angel investment group or network? You should be prepared to give away a sizeable percentage of your business in relation to share division.
Government Loans or Grants
HM Government offers up to £25,000 for small business start-ups and the Welsh Assembly Government and the Scottish Parliament also provide funding for small businesses. Many local councils also have grants and funds available to help local businesses succeed. Why not evaluate public body funding routes to help your business succeed?
If you are unsure about how to find additional funding and need help why not get in touch with Prestige Business Management today? We can help your business understand the risks of different funding avenues and help evaluate your business health. Call us today on 0203 773 2927 to find out more about how we can help your business thrive by finding funding avenues for your business?