7 different funding options for SMEs
Great business ideas get entrepreneurs excited. The tricky part is sustainably funding those business dreams. There are more options than ever for SMEs. From crowdfunding to angel investment, we take a look at the possibilities open to business owners.
1. Venture capital funding. Venture capital (VC) doesn’t involve regular repayments like a bank loan does. For start-ups with irregular cashflow this means that any money that comes in can be ploughed straight back into the business. It lowers your personal risk as you won’t have to offer a personal guarantee to the investors if things don’t work out. They can open doors and new networks to you, helping to accelerate your growth.
2. Angel investors. These wealthy individuals provide capital in return for equity or convertible debt. You often get a lot more one-to-one support and personal mentoring than with VCs, especially if they made their money in a similar field to yours. It’s common for angel investors to support local initiatives, so if your business has a particular local angle then it could certainly be an avenue worth exploring.
3. Grants and tax breaks. Thousands of SMEs are missing out on funds by not realising they are eligible for tax breaks or government grants. The UK government is actively looking to support businesses that are making valuable research and development contributions to the UK economy. R&D isn’t just done by scientists in white lab coats in laboratories, it can be done by a start-up building a new app or an SME finding an innovative solution to a workflow process.
4. Cash advances. Unlike banks, advances are based on a fixed fee, not interest rates. It’s one more example of funds not available before fintech. The rise of fintech has been fantastic for entrepreneurs. Tech start-ups are constantly building upon and expanding services traditionally the domain of the high street and usually offer them at a cheaper rate and with much less hassle.
5. Peer-to-peer lending. Peer-to-peer lending (P2P) platforms match SMEs directly with individuals or organisations who are willing to lend money. Loans tend to be quick and made up of many small investments, which is why investors find it so appealing (they can spread the risk). P2P is a model well worth considering if speed is a major factor for you.
6. Crowdfunding. Instead of asking a few people for large sums of money, with crowdfunding you are asking thousands of people for small sums of money. Entrepreneurs pitch their ideas online to the community, set a target and see if the funds come back in. It’s possible to raise huge amounts in a short space of time. Other advantages of crowdfunding is it can help get your business plenty of exposure and a wealth of useful feedback.
7. Bootstrapping. This is all about building a business with no external input and, for some, the digital world has made this route more attractive (and feasible) than it used to be. Futrli can support you all the way. It is a platform to help you identify when you might need finance and helps you make a robust plan for getting it. Our all-in-one forecasting and reporting engine is designed to bring the future of your business to life visually.