Opening up a business can be a very difficult endeavour, especially in this era’s cut-throat market. Troubles can start well before you even enter the market, as they can extend as far back as to when you start looking for ways to fund your project. Business survival is rather difficult and you could very well find yourself in need of extra funds.
As a small business, you have several options, all of which are viable. Many of these sources will be more likely to put their necks on the line for an established company, which they may feel discouraged to do with a start-up. However, there are many options for small businesses. But you may be unsure as to which source to go to, or of the different types of sources altogether. With that said, here is a list of the different sources of funding you, as a small business, can go to.
The different sources of funding
As a small business, your finances can take a sizable hit since competition is tough. This can force you into the distasteful process of scouting a generous person or organisation that is willing to help, also known as a funder. They can come in many different shapes and sizes. Here are the different sources of funding you should keep an eye out for as a small business.
A visit to your bank is perhaps the most obvious source of funding you can reach for. It also gives you a list of different options to pick from. Here are a few:
Business term loans
A business term loan is known to be a traditional loan. By applying for this type of loan, you can begin receiving funds for as little as £1,000, where the funds can go all the way up to £500,000. More often than not, both banks and lenders will provide flexible payment plans, which is generally between 1 and 5 years. H
However, this plan will differ from one lender to another. Interest rates for this type of loan typically lie in a range between 7% and 30%. Business term loans can be used for any purpose, as you do not necessarily have to specify what it is. They can get approved in as little as just a couple of days, making it ideal for those that are pressed for time.
Small business loans
Banks have dedicated loans for small businesses, where the loans can go as high as £4 million. However, you should conduct your doings with the fees of a small business loan with caution, since they can be very expensive. You can always apply for a loan from a lender online. You should research further online and take an in-depth look at the different types of potentially best business loans online. The goverment also offer funding of up to £25,000 via the start-up loans scheme for businesses within their first two years of operation.
Dedicated for the sole purpose of acquiring equipment. Equipment financing (also known as asset finance) uses the equipment that is purchased with the loan as collateral. Only, you may find yourself paying more than the initial value of your equipment. This can happen in such a way that, with some assistance from depreciation, your equipment can wind up obsolete by the completion of your payments. Though, fortunately, equipment financing does not take long, as it can take as little as just a few days.
2. Friends and family
If your small business is suffering and you are looking to raise enough money to get by during the next fiscal quarter, perhaps turning to those you know will help. Unlike the banks and lenders, your friends and family will have your best interest at heart.
So, whether it is a loan they give you, or if they are using this opportunity to invest, or if they give you funding out of the kindness of their hearts, your friends and family will always be lenient and flexible. However, you should be careful about losing their money, seeing as how some people could be less forgiving than others.
3. Angel investors
Angel investors are affluent individuals that are always looking to invest. However, their investment is not free of charge, as they will be expecting either ownership equity or convertible debt in exchange). Today, angel investors are beginning to form investment groups so that they may spread the risks and perform better research. You can search for angel investors online, or you can opt for a more traditional approach and talk to your chamber of commerce. They might be able to tell you who is interested in funding new ventures. Worth noting many UK angels will only invest with SEIS advanced assurance.
4. Cloud funding
If you are looking for an avant-garde approach to acquiring a fund, you can always pitch your ideas to investors on the internet. If your pitch appeal to them, they will contribute with their funds. However, you should be mindful of the restrictions on how cloud funders can operate.
5. Venture capital
As a small business, you will likely be looking for early-stage funding. Should that be the case, venture capitalists are perfect for this job. However, these types of firms will probably be looking to make large investments; in return, they will take a significantly larger share of your business. More often than not, they will be after a controlling interest.
Thanks to the internet, you can now reach out to various potential investors and hopefully acquire funding. This web-based source of funding will have your investor gain advantage from investing in your business by either debts, equity or have their investment reward-based. You should look to do your homework before embarking into the crowdfunding world since there are hundreds of platforms to pick from.
In the funding world, there are many options your small business can consider. Depending on whom you can strike a deal with and the advantages of the deal, you will then want to move forward and seize your funding.