Small businesses in the UK are the backbone of the economy, but getting them up and running can be a demanding process. The biggest problem? Funding.
Lack of funding is the reason why a majority of small business ideas never materialise or fail in the first year. Therefore, “would-be” small business owners need to approach the issue of funding from all angles to achieve their goals.
Are you an entrepreneur looking for start-up seed money or are you a struggling business owner looking for ways to append your cash flow to grow your business? Here are some practical ways to fund your small business.
Small Business Loans
Banks offer small business loans to entrepreneurs. However, their underwriting process is stringent as they seem to be extra conservative with their money, which can force you to think outside of the box for a viable alternative.
Luckily, there are plenty of alternative lenders that you can turn to for unsecured lending U.K. These alternative financers are fast, flexible and open-minded enough to help you overcome the lack of funding that is proving to be the downfall of so many small businesses in the economy.
Family and Friends
If you have spent years building social capital with family and friends, it might be time to cash in. Just put together a business plan and start calling and visiting the most promising leads among those closest to you.
You can expect a range of responses from them. Some may give you the money (free capital), and others may loan it to you. For those that give you a loan, they may or may not ask you to repay it with interest – be sure to get the terms straight and avoid exorbitant interest rates.
Others may want a piece of the pie, so they become shareholders. In that case, you might want to stay away from those who wish to have a controlling interest.
Angel Investors
An angel investor is an informal investor who becomes a shareholder in exchange for investment capital. Having them as a shareholder means they will be involved in the decision-making process, and you will be required to act in the best interest of the business and its shareholders at all times.
While angel investors are a great option to offset your funding gap, they aren’t all that easy to attract. You need to get them to trust you, which requires excellent communications skills. Moreover, most importantly, you need to make them believe in your vision with a well-thought-out and comprehensive business plan.
You may want to consider throwing in some forecasts and projections into the mix, to make the deal sweeter.
Self Funding
When small business loans and other financing options are out of the question, the remaining option is to boot-strap (self-fund) the operation yourself. If you refuse to accept defeat, and you believe that the business idea has the potential for success, this may be an option for you.
As long as the business hits the ground running, there is a high probability other funding options will open up down the line.
A great way to fund the idea yourself is to sell your assets. Take an inventory of what you own and see if you can convert it into some quick cash. Selling assets is a worthwhile risk (because doing business is all about taking risks), and the most significant upside is that there is no remaining debt to repay.
As you can see, business owners have a variety of ways of accessing the financing they need. It doesn’t matter what option you choose, as long as it allows you to focus on growth and profitability.
