7 funding routes to help your business grow

You have started a business but you’re short of one very important thing… money. Having an extra source of capital can help your business in a number of ways: You could hire new staff, acquire a new office space, build a new product, go live with a marketing campaign, and of course much more. But where on earth do you get funding from? Finding the right place for this can be tricky. With this in mind, we have done some investigating to give you an idea of the most popular funding routes available to you and your business. Read on to find out more. 

Go ‘old school’ with a Bank Loan

Banks are the most well known (and well established) source of funding out there – but actually getting a small business loan can be far from straightforward. Terms are often strict and banks will usually expect a quick ROI (Return On Investment), not an easy thing to deliver for a new business trying to grow.

If you do decide to go down this route ensure that your grasp of the numbers is spot on and that you have a thorough business plan. Banks will want to see a well-conceived plan that clearly outlines how you intend to spend the borrowed money and how this will ultimately help your operation.

Get a new kind of loan with Start Up Loans

Start Up Loans was launched by the government in 2012 and has already issued over £250m to small businesses around the UK.

Their terms are generous – you can take up to five years to pay back a loan with a fixed rate of interest, and loan sizes can go up to £25,000 – with the average loan size being around £5,500. As well as this, Start Up Loans offer a ‘personal’ touch by giving loanees access to business mentors who can assist with business planning and cash flow forecasting.

You can apply for a Start Up Loan if you are living in the UK, over the age of 18 and as long your business has traded for less than two years.

Pitch to the masses with Crowdfunding

Crowdfunding allows you to pitch your idea to potential investors via an online platform. Anyone can invest (aka crowdfund); business owners, business angels, general members of the public – in short, anyone who is interested in what you’re doing. There are now multiple crowdfunding platforms out there for you to explore, with the ‘big’ ones being: SEEDRS, Crowdcube, Kickstarter and Indiegogo. It’s well worth doing your research as you may find a crowdfunding  platform that caters specifically to your industry.

Serve society with a Grant

Does your business benefit other people as well as yourself? If yes, you could apply for a grant. A grant is a sum of money given out by the government (or a public institution) for businesses who can show that their product or service will benefit society.

The government provide a large array of grant schemes to all businesses. The  ‘Finance and support for your business’ page lists all the available grants that your business could benefit from. Grants tend to vary, covering a vast array of industries and specialties. Therefore the type of grant you apply for will depend on your industry.

One thing you should note… applying for a grant is notoriously time-consuming and you will be competing against plenty of other businesses to get one.

Relieve the pressure with Peer to Peer

Peer to peer (P2P) lending is another online method that matches lenders with borrowers for relatively low fees. It is essentially a loan without the conditions of the banks, with P2P platforms giving a much more favourable rate of interest. This can often be a very quick way to get an injection of funding.

Examples of well known P2P lending platforms include Funding Circle and Zopa.

Love Business Angels (instead)

‘Business Angels’ are usually wealthy individuals with experience of investing in multiple companies… think Dragon’s Den without the glitz and glamour. Just as in the TV show, an ‘angel’ will usually request a significant stake in your company, in return you could get someone with experience and expertise to help you.

There are currently some great places to locate an ‘angel’ that is right for you. Take a look at the Angel Investment Network. This site connects entrepreneurs looking for investment with ‘angels’ looking to invest. For an idea of what ‘angels’ are looking for, visit the UK Business Angels Association site.

Tech it up with Venture Capitalists

Venture Capitalists (VCs) are typically firms that invest in small companies who have potential to grow. A VC firm will usually ask for a stake within the company – and often a hefty one – 40-70% depending on the investment.

Not exclusively, but more often than not, VCs like investing into tech startups – companies who demonstrate that they can offer innovative solutions – by harnessing new technology. One example of this is the VC firm SeedCamp who invest heavily into tech-based firms (and were the first investors of currency converter firm Transfer Wise). Connect Ventures are another VC firm who invest in early stage tech startups.

So, if your business utilises technology then a VC firm could be the right funding source for you.

Seeking funding for your business isn’t something that should be done on a whim. You need to put a large amount of thought and consideration into what you need funding for, how much you need, and what you’re willing to give in return. Decisions made at the funding stage can have have serious implications further down the line. Therefore you must fully research the options available. We hope this blog post has given you enough information to get started.

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