by Julie Lord
At a recent small business event, one of the most common topics of conversation amongst budding entrepreneurs was the best way to fund their fledgling businesses. Everyone I spoke to had raised enough cash to get started in a variety of ways, but it was taking the business to the next level that was causing some angst.
Many business owners had assumed that if they could prove they had managed their finances well, grown, and developed a small business, then finding the funding to grow even more would not be a problem. We are not talking about brand new businesses here with exciting ideas but no proof of their ability to succeed. These were all businesses that were already succeeding, albeit on a small scale, but many of them were struggling to finance growth.
Of course, all businesses are different and different forms of funding are likely to be relevant or attainable, but what is reassuring is that small businesses are no longer dependent on bank loans for their financing. There is a whole range of alternative options to investigate, all with pros and cons. So check out what you could be approved for, but also remember, that just because your business is approved for funding, it does not necessarily mean it is right for you and your business. So consider all options carefully before signing on the dotted line.
Business Bank Loan
This should probably be your first port of call, but young businesses often won’t qualify under the banks’ strict lending criteria, but it’s always worth a shot.
Government-Backed Loans and Grants
These are fixed rate personal loans suitable for starting up or growing a business and include access to business support services too. You’ll need to have a business plan, cash flow forecast, and personal survival budget in place.
There is also a range of grants available, such as Research & Development Grants.
Industry Grants
These usually have specific criteria, but if you meet the criteria, some of the grants run into tens of thousands and some have no strings attached. Your business will be expected to have a fully functioning website and social media pages. Many also require a video explaining your enterprise in addition to the usual written application and business plan. Some grants are paid directly into your business bank account, but others will only reimburse actual expenditure, which is when many small companies call upon a family member to act as a guarantor for a guarantor loan while awaiting the grant funding.
Startup Accelerator Seed Funding
Similar in many ways to an industry grant they are popular because they also offer free advice and sometimes, even free office space.
Angel Investors
Some major cities will have groups of local investors willing to invest in proven small businesses. Get networking in your local area to find any that might be appropriate for your business.
Crowdfunding
A new and potentially exciting source of funding open to all businesses. It can mean that you find funding through small investors, but the advantages are that you do not have to hand over control to any major investor or qualify as you might have to do for a business loan of the government grant.
Venture Capital
If you cannot access or do not qualify for a business loan or some form of the grant, then there are professional investors who will invest in small companies that have a proven business model and are seeking to grow. However, the funding available is major league, so your business would need to have a very attractive opportunity, which is likely to provide a good return on the investment. Venture capital is probably not right for a small business run from a garage.
Every funding option requires hard work and preparation by you – the business owner: a business plan, cashflow projections, a professional website, and social media presence are the very minimum. So, before you look for funding for growth, make sure your foundations are sound.