All good businesses, need funding to keep growing - for cashflow, stock or equipment (to name a few). But if the idea of a bank loan gives you a headache, then read on - there are other solutions
Traditionally, there has been very little choice and too much bureaucracy. But things are changing – rapidly! The recession has bought some very innovative and cost-effective solutions to help good businesses keep growing. Here are some tips on getting funding - minus the hassle.
What exactly do you need funding for?
Asking this simple question will help you quickly identify the relevant products or avenues to finance. Is it to boost cashflow during the quiet months? Or to buy a new printer or delivery van? Each purpose could lead to a different range of finance solutions. More importantly, it will save you time by excluding sources you won’t be able to apply for, and will also help you find some more 'specific' finance types which may be more cost effective.
De-bunk the jargon
Technical, industry speak is used all too often with business finance, and it's confusing. It helps to learn about just a few key terms, particularly when it comes to the types of finance 'products' out there. It also means you're well-armed to get the best deal out there. We love Wikipedia for its straightforward, clear explanations.
Think outside the banks
There are lots clever new options for business finance. Don't just stop at the bank – a quick scan online (and asking other business owners) will reveal all sorts of new (and possibly cheaper) sources of finance, like peer-to-peer business loan providers (Funding Circle, for example!), local enterprise funds like Bcelf, or crowdsourced equity finance providers like crowdcube
Get your accounts in order
Sounds obvious, but it's one of the major reasons businesses get tripped up in the application process. Keeping up to date with monthly management accounts, and making sure you don't leave annual accounts to the last minute (this can bring your credit score down) are simple fixes you can put in place. An online accountant will make it a lot easier - try Crunch.
Be savvy with your money
A decision to move money in or out of the business will have a significant effect on your accounts, which in turn impacts on your credit score (which lenders look as part of the assessment process). A common mistake to avoid is drawing dividends in excess of the profits you've made. It reduces your net assets, which can drag your credit score down. It can then remain low until you file your accounts again in a year's time.
Funding Circle is an online marketplace where businesses can borrow from real people. It's also the first peer-to-peer business loans provider in the UK.