Accessing business finance for small businesses in the UK can be tricky, as it can be difficult to know where to go and what to look for.
When you’re running a small business, it’s important to have access to the finance you need to grow and succeed. There are a number of ways to access business finance, and the best option for your business will depend on a number of factors.
In this article, we outline 7 different ways that you can get financing for your small business.
Why is business finance for small businesses important?
Small businesses often need all the help they can get.
Access to finance for small businesses means that they can grow and succeed in ways that might not have been possible before. One of the main reasons that new businesses fail is a lack of cash or cashflow problems. Business financing can be a great way to ensure that cashflow is always strong, and that the company can continue running smoothly.
It also makes sure that unexpected costs can be taken care of without causing any huge disruption to the day-to-day operations.
If you’re looking for funding for your small business, then you can get a free instant quote from us at Rise Funding and we’ll provide you with a quote that won’t affect your credit score, and that will be aligned to your needs.
7 business finance options for small businesses
There are many different ways to obtain funding for a small business. Here are some of the most popular.
1. Loans from financial institutions
Banks and non-banking business lenders offer loans specifically for small businesses. These loans can be used for a variety of purposes, including start-up costs, equipment purchases, and working capital. The eligibility requirements and interest rates vary from institution to institution, so it’s important to shop around and compare options before deciding on a loan.
You can also enlist a broker to do this for you, which will allow you to save time and also enlist some expertise into your small business financing strategy.
2. Government loans
Following the Covid-19 pandemic, the Recovery Loan Scheme was introduced, which has now been replaced by the Growth Guarantee Scheme. These schemes provide government-backed loans from a variety of lenders that allow you the peace of mind that the lenders have been approved by government, but also the lenders have 70% of their loan protected by government, giving them the assurance on their side.
Take a look at any grants or regional funds in your area too, which can often be geared towards providing funding for local small businesses.
3. Angel investors & venture capitalists
Angel investors are individuals who invest their own money in small businesses in exchange for equity in the company. Venture capitalists are firms that invest in small businesses in exchange for equity.
Both angel investors and venture capitalists typically invest in businesses that they believe have high growth potential, and both can be a great option if you’re looking to achieve some funding for your small business.
However, they also tend to invest only in businesses that are in industries they understand well. That’s why it’s important to do your research and make sure you’re pitching your business to the right people.
4. Crowdfunding
Crowdfunding is a way of raising money by asking a large number of people for small donations. There are a number of crowdfunding platforms available, such as Kickstarter or GoFundMe. When using crowdfunding to finance your business, it’s important to set realistic goals and offer rewards that will incentivise people to donate money to your small business.
Businesses that contribute to the local community are often a great option for crowdfunding campaigns, as they will benefit the wider community, not just your own business.
5. Personal savings
One of the most common ways to finance a small business is with personal savings. If you have enough money saved up, you can use it to cover start-up costs or expansion expenses without having to take out a loan or sell equity in your company.
However, using personal savings can be risky because if your business fails, you could lose everything you’ve invested. Make sure to do proper calculations and forecasting before making any big financial decisions.
6. Bootstrapping
Bootstrapping is a way of growing your business without external funding by reinvesting profits back into the company. This can be done by reinvesting profits back into the company to expand operations or hire new employees. It can also be done by reducing expenses in order to free up cash flow that can be reinvested back into the business. Bootstrapping is often considered the most risky way of financing a small business because there’s no safety net if things go wrong; however, it can be very rewarding if things go well because you won’t have any debt or equity dilution.
7. Friends & family
One final option for financing a small business is through friends and family members. If you have someone in your life who is willing to invest money in your business, this can be a great option. However, it’s important to approach this carefully as there is always the potential for things to go wrong and damage relationships.
Conclusion
Accessing finance is an important part of starting and growing a small business. There are many different options available, from traditional bank loans to more innovative choices like crowdfunding. The best option for your business will depend on factors like eligibility requirements, interest rates, and how much risk you’re willing to take on. It’s important to do your research before making any decisions so that you choose the best option f or your particular situation.