Raising Finance

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10 sources of funding for your business when the banks say “no”

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Unfortunately, the days of being on first-name terms with the local branch manager who would quickly sign-off whatever you need have long gone. In spite of that, it’s still the most common form of borrowing for businesses. In fact, over a quarter of SMEs approach their bank manager for a loan at some stage or another with credit card borrowing almost as popular, with 22 per cent.

However, for those that have been turned down by the bank, or don’t feel a bank loan is the most appropriate source, there are plenty of other ways to drum up money and help your business flourish.

The 10 alternative ways to fund your business:

1. Business angels

Business angels are wealthy entrepreneurs that are actively seeking people with dynamic business ideas to invest in. They’ll want something in return, which is normally a share of the business. However, you’ll not only benefit from their investment, you’ll also get to reap the rewards of their experience. 

2. Venture capital

If you need serious investment (£500k plus) then venture capital financing is the answer. This option is best suited for those who are primed for rapid growth, and just need a cash-injection to get moving. However, don’t expect to get a huge lump sum upfront. Generally speaking, VC funding comes in instalments to help manage growth effectively. You can also expect to give away a substantial portion of the business – but in return, you’ll get significant help to scale-up with impact.

3. Crowdfunding

Crowdfunding is a recent phenomenon, which involves asking people to invest specified amounts of money in your business, usually in return for something. Do it well, and you’ll swiftly raise the money you need without spending too much in the process. However, it’s not as easy as it looks, and in today’s competitive market, you’ll need to make sure your business idea stands out. 

4. Peer-to-peer lending

Most peer-to-peer lenders are private individuals investing in a range of different business ideas. They run via sites with some operating on an auction basis, which means, after completing an initial assessment, you can select a lender, based on a rate of interest and loan period. However, you’ll need a good financial history, and if you’re a new company, you might be considered “higher risk”, which will mean higher interest rates.

5. Asset financing

Secure your loan against your capital assets and gain money quickly for your business. The downside is clear here. Fail to pay it back in the specified time, and your assets are seized by way of payment. However, if you’re confident that you can fulfil the terms of the loan, it’s a good way to get your mitts on the money you need.

Continue reading the five remaining tips on page two…

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