The tone of this brief piece is going to be up-beat and positive.
Business finance IS available out there and it can help you make a success of your enterprise.
However, let’s get one brief “dose of cold water” statement of reality out of the way first.
Finding business finance isn’t easy
Whether you’re a start-up or business already in-flight, business funding isn’t handed out on every street corner. You’re going to have to work to find and then obtain it.
That consists of two main aspects and they’re sometimes showstoppers for the unwary:
- you need to go to sources of finance that are suitable for your particular business situation (unless you want to waste a lot of time being turned down not because your proposition lacks merit but simply because you’re speaking to the wrong type of lender);
- whoever you’re speaking to, your proposition MUST be up to professional standards and show that you understand your business and of critical importance – its current financial position. Poorly presented finance requests are the biggest single cause of funding refusals.
Sources of funding – start-ups
You need to recognise that to potential investors, a start-up business is often one of the riskier things to invest in. Yes, the rewards are potentially high but so are the risks.
Your main sources where finance may well be available for the right ventures are typically:
- the banks. A conventional channel and one that has been the source of much public criticism since 2008 but which is, nevertheless, an ongoing option. Anticipate needing to find some potentially hefty financial contribution from your own personal resources;
- Business Angels / equity funding. Typically much more entrepreneurial than the banks, they may inject money into start-ups in return for a share of ownership of the company. Note that many business angels only deal through intermediaries who have already vetted the proposition on the table for credibility. They might also be more inclined to invest in companies who have at least some trading history behind them;
- the government. Things here tend to change over time but the government does help with business start-up funding both directly and indirectly through tax-breaks for business angel investors etc.
- friends and family. There are good reasons why it’s advisable to keep your business finance and family/personal lives separate but even so, this is a potential source of funding that shouldn’t be overlooked.
Business growth and expansion funding
Here, your channels might typically be slightly different:
- Business Angels. These are potentially risk-inclined investors and providers of finance options for business. Be aware though that you’ll need to be on your toes in terms of the quality of your proposition and will also need to present your trading history to date in order to be taken seriously. Again, many Business Angels will only consider applications from specialist business finance providers who they know will already have reviewed and approved the proposition in principle;
- equity release. Many owners of businesses have considerable sums (equity) tied up in things such as property. Accessing that equity, with help from those same specialist business finance providers, can be one of the most cost-effective and easiest finance options for business. Not only that but you won’t have to share ownership and control of your company.
So, if you’re thinking that finance options for business are almost non-existent in today’s world – think again!