5 Ways To Fund Your Small Business In 2015
Small to medium businesses (SMEs) make up around 99% of the private sector in the UK.
Being such a major part of the economy means that SMEs are highly valued – and rightly so. And if you are thinking about starting out on your own, there’s already a wealth of information to help you make your business a success.
But surveys over the past few years have indicated that many SMEs may not be aware of all the funding options that are open to them. We’ve pulled together this list to highlight some of the main ways to funding that SMEs can consider.
Government Investment Schemes
These include grants, loans and other incentives. Unfortunately it’s not quite as simple as just asking for finance then receiving it, but if you have a solid business plan it’s worth looking into.
The government backed Start Up Loans Scheme for instance offers mentoring as well as lending. And as James Caan of Dragon’s Den fame says, mentoring is often as important as the loan itself – and maybe even more so. More on Start Up Loans here.
Is a quiet revolution underway? According to the UK Crowdfunding Association, this may well be the case: “Crowdfunding has been described as ‘democratic finance’, allowing businesses and projects of all forms and sizes access to money while bypassing traditional banking institutions”.
This has to be one of the biggest developments in business funding for some time – especially during a post-downturn era when banks aren’t in a position to lend as freely as before. It’s even been suggested that crowdfunding could go on to ‘completely replace’ some aspects of retail banking.
Okay, so while bank loans may not be as easy to obtain as they once may have been, they are still a viable option for many.
The plus side being that the bank isn’t looking to involve itself with your business – all you need to do is make sure your repayments are timely and that’s that.
Friends And Family Borrowing
This is quite a common option, but does have its downsides – namely the close relationship you have with the lender. And if times get tough, that relationship could potentially come under strain.
Check out this Pros & Cons of Business Funding infographic for more on this one.
This can be a very powerful way to get a business on the next level – but it comes at a price. Angels investing is a risky business, so the investor will want a very good return on their investment.
The UK Business Angels Association states that around £850 million is invested in this way each year in the UK – although the figure could be even higher, since many invest privately.
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