Business Growth and Cash flow is at the top of every small business’s list of concerns — often simply because of uncertainty about how best to secure funding with the confusing choices on offer.
Start-up businesses often need cash for equipment, premises, wages and marketing costs, but where is it going to come from?
There are five main avenues of funding. The first and simplest is using your own money. But if you don’t have lots of cash in the bank, you can seed fund the business by simply working at your usual job whilst getting your business up and running. However, this can be a slow, frustrating route, but a less risky strategy than giving up your day job. Alternatively, you can ask friends and family or look at raising funds through a personal loan and as a true test of your belief in yourself and the business idea there is the riskier strategy, of raising finance through equity in your property if you own your own home.
The second potential source of funding is a bank loan. However, it is becoming harder to secure a bank loan, so many businesses are heading straight to other sources of funding. Applying for a bank loan can be labour-intensive and fraught with delays with no guarantee of success. You will need to supply a business plan, including a breakdown of your start-up costs and predicted returns You will also be credit checked and most likely be asked for personal guarantees. None of that should put you off and it is also worth remembering that there are other sources of loans such as The East of Scotland Investment Fund, or Community Development Finance and Peer-to-Peer crowd funding as well as other providers so it is worth doing your homework and not just assuming the bank is the only option.
The third source of potential funding is from investors. In short, you raise capital by giving a slice of your business to interested parties willing to invest cash in it. An investor can be an individual, a business or group. This is a great way to inject cash and expertise into a business that needs rapid growth but be ready for a high level of scrutiny and some potentially very demanding business savvy investors having a say in your business.
The fourth main source of funding is the fastest growing and most exciting: crowd funding. This sees business owners appealing to supporters or micro-investors, whether they are friends or acquaintances, suppliers or customers, for investment amounts ranging from small amounts to tens of thousands of pounds in return for a slice of the business. As banks tighten their grip on loans, this method of funding is growing, driven by the ability to easily match businesses with micro-investors via the internet. You’ll need to create a pitch and the investors will get a share in the equity of your company.
The fifth and final source of funding is to apply for a grant. Unlike loans, grants do not have to be paid back. Consequently, they are often difficult to come by and competition for them is high. The government, local authorities and charities often run schemes. You will frequently need to put up as much money from your own pocket as the amount of grant you are applying for. And you will need to submit a detailed business plan.
It is also worth looking at other ways to ease your cash flow whether its R&D tax credits, Business Rates Relief, help with Employer National Insurance or just making sure your costs and pricing structure are correct.
With the financial landscape in flux at the moment, funding choices can be confusing. Working with Allsquare will help you quickly and knowledgeably negotiate the complexities of securing funding for your business. Allsquare’s expertise in business growth and development could be vital when putting together a business plan. In addition, they can help your business to increase profits so you can get it to where you want it to be that little bit faster — a perfect partnership.