In years gone by, the first port of call for any potential new business owner would have been an appointment with the bank manager. Historically lofty, stuffy and shockingly well-dressed, decisions on whether your dream would become a reality were handed out in short supply.
But now, the times have moved on. While bank loans are still a great option for some, attitudes have also changed and demand for traditional finance is low. The alternative finance sector has grown by a massive 43% in the last year, and has seen start-ups and small businesses net around £3.3bn.
Even the UK government understands the importance of alternative funding. Its Bank Referral Scheme, introduced in 2016, requires high-street banks to pass on the details of those who have been turned down for loans to alternative funding providers. Since its inception, small businesses have been able to access £15m of funding they may not have otherwise been able to.
So what are your options? Here are just three of our favourites.
The UK is a great country to be a business owner (number one in the world according to Forbes magazine!), and the government is keen to promote business old and new. They do this in part by offering grants across a huge range of sectors and in a variety of different formats.
These grants could be in the form of free or heavily subsidised equipment, lower costs, a soft loan (generally with lower interest rates and more favourable terms!) or a straight-up cash injection. You can search all available grants in England directly on the government’s website. There are different sites (and grants) for Wales, Scotland and Northern Ireland.
The popularity of peer-to-peer lending from lenders like Funding Circle has soared in recent years. It’s a type of business loan, but instead of borrowing from the bank, you borrow from a large number of private investors who are lured to lend their cash by favourable interest rates.
It’s popular for a reason, the first being that it’s usually unsecured – you won’t be asked to put your house on the line for collateral. Interest rates can be higher for this reason, but peer-to-peer lending is also more accessible. You can usually have a decision in days, and you don’t even have to leave the house!
Often confused with peer-to-peer lending, (though technically, peer-to-peer is a form of crowdfunding), it sources small amounts of money from a large amount of people. In its most prolific format, from one of the well-knowns like Kickstarter , backers are offered some sort of reward or incentive (usually a heavily discounted product) in return for their money.
Others, like Seedrs or Crowdcube offer equity crowdfunding, letting investors buy a tiny share in the business. Like peer-to-peer lending, it’s unsecured. A good crowdfunding campaign can stir up a lot of buzz about your business, but conversely, allows your idea to go public (and therefore be copied) before it’s a reality.
For help with your finances, give us a call today!