Finding the funds to grow your business

When you started your business you probably funded it through your own savings or perhaps found family or friends willing to invest in your vision. However, as things have progressed and your trade has grown you will likely need to find further cash to expand into new product ranges or geographical areas.

Your first port of call may be your bank. Record numbers of small business loans are being approved; 79% in the third quarter of 2017 according to UK Finance[1].  You will need to carefully consider the repayments that you will be able to afford and any security you may be required to put up. It’s also worth bearing in mind that if your current bank turns you down, that there are various new “challenger” banks that are aggressively looking for a share of the small business market.

It’s also worth remembering that the government’s Start Up Loans Company[2] can provide loans of up to £25,000 to new businesses at lower rates of interest than a regular bank loan.

If you are looking for equity, rather than debt, finance a business angel may be what you need. You will need to consider how much of your business you are willing to give away in return for their investment, and usually such investors will want a seat on the board. For more information on small business angels, visit the website of the British Business Angels Association.[3]

Another popular source of equity funding is crowd funding. With this model, individuals can invest small amounts in your company and the total funding amount will be raised through multiple (possible 100+) new shareholders. Normally you will be required to produce detailed forecast to go alongside your pitch, and will be required to raise the total funds within a certain period of time in order to receive any cash. You will also need to consider the additional administration burden of having dozens of new shareholders (although some funding companies provide nominee services), and again, you will need to think carefully about how much cash you will need to raise and how much equity you are willing to give away.

Whatever route you decide to take you will need to plan carefully with your business advisors to ensure efficient execution. You will need to prepare a convincing business plan so that lenders or investors can understand clearly what you intend to do with their cash, and, more importantly, how quickly you intend to give them a return.