If you are the owner of a small business, you may well believe that raising funds easily is little more than wishful thinking.
Although the following ideas may not make the process entirely painless – or even appropriate in some cases – they may nevertheless provide the answers needed by businesses looking for expansion and growth.
Small business loans
If you have tried the bank and it has turned down your application for a loan, or if you have already decided that there is little point in making such an application, you might nevertheless want to consider this source of funding.
Lenders typically operate online and this allows a number of advantages:
● the application is simple and straight forward;
● it is likely to include a few questions about you and your business – but unlikely to require anything as elaborate as a written business plan;
● you may choose the amount you wish to borrow (typically up to around £50,000), the repayment term (typically up to 52 weeks), and see at a glance how much interest you may then need to pay and the monthly instalments required;
● a decision on your online application may be made within just one working day; and
● the requested funds may be transferred directly into your company bank once account more or less immediately once approval has been given.
Your qualification for such a loan may vary from one lender to another. A helpful description of the process involved and your eligibility for a loan, however, may be found on the Everline short term business finance website.
This is probably one of the most popular and fastest growing methods for raising finance and involves matching groups of individual lenders and investors with those small businesses in need of finance.
There are both loans-based and investment-based forms of crowdfunding, typically, arranged through online platforms – which typically charge a commission for the service they provide. For a time, there were concerns that some platforms were being less than transparent with their lenders and investors about the returns they were likely to enjoy. As a result both forms of crowdfunding are now strictly regulated by the Financial Conduct Authority.
There is also a public sector source of crowdfunding through the government-backed Funding Circle, which is one of the UK’s largest peer to peer lending platforms. Its popularity derives from the benefits to businesses in being able to access much-needed funds and to lenders in the returns in interest they may receive. According to a report in the Financial Times on the 21st of February 2014, for instance, it was reported that lenders stood to earn as much as 12% on their outlay.
Government is not generally known for the speed or ease with which it reacts or gets things done. Even so, it appears to be stepping up its efforts to ensure that small businesses may be able to raise funds more easily in future.
On its website advising those who want to start a new business, for example, the government encourages individuals to seek a bank loan – in support of which the applicant needs to provide cash flow projections and prove that any loan and interest are going to be repaid.
Furthermore – and contrary to conventional wisdom perhaps – there are some suggestions from the British Bankers’ Association’s Better Business Finance that raising a bank loan may be easier than many people think. Whereas only 37% of applicants had any confidence in raising the funds for they applied, as many as 67% of all applications were actually granted in the third quarter of 2013.
Prompted by several government initiatives, therefore, the British Bankers’ Association is determined to convince small and medium sized enterprises to contact their banks in any effort to raise business finance more easily.
Government grants are also available from a wide variety of sources. Some of this grant-aided funding is available nationally, whilst the remainder may be local or industry specific. Careful research may therefore be necessary and your business may be eligible for more than one type of grant.
The process of grant applications is unlikely to prove an easy source of raising business finance, although the experiences described by one Scottish company in receipt of several forms of government grants suggests that preparation, application and contact with the right people may pave the way for essential business funding.
Bio: Charles Peddie is a ex high street bank manager who enjoys writing about the industry and trying to help people save money.