Running a successful business is exciting and energising. Thousands of entrepreneurs are seeing more customer demands for their product or services, but how can they meet all these demands without healthy cash flow or funding to help expand growth? The UK banks are not lending to SMEs as much as they can or should, yet many entrepreneurs do not know of all the funding alternatives to their banks. If you are one of such companies our blog can provide a guide to the 5 ways to help your funding.
A peer-to-peer exchange site will allow you to win funding with private lenders, all through a secure online platform. They are quick to make a lending decision and you should see funds reach your account quickly. Many peer-to-peer companies are also now regulated by the Financial Conduct Authority which offers even more security not only the company loaning funding but also the private investors. A number of companies are now well-established in this space, and several offer generous terms.
You may have heard about of crowdfunding, and wondered what is it all about? Well to put it succinctly crowdfunding is an online platform allowing the entrepreneur to raise funds from a ‘crowd’ of investors. The entrepreneur creates a campaign on the crowdfunding website with details about their business and how much they need to raise, also offer equity in their business. The ‘crowd’ of investors see the campaign and can decide to invest from as little as £1 or upwards to thousands. It is a way of democratising the investing world, so everyone can be an investor in a project that they are passionate about.
Donors or investors on crowdfunding sites are mainly private individuals investing small sums. However, with this method, the campaign must reach the funding target or will not win funding at all. So if you need £40,000 and only achieve £20,000, you won’t receive any funding. Crowdfunding is an effective marketing and research tool as well for the entrepreneur, but to achieve funding, the campaign must be excellent and win hearts of minds of investors.
For more information about crowdfunding for your business, send our team a message and we can help you.
Angel investors are generally high net worth sophisticated investors, who may have or had their own successful business. A good angel investors not only can help with funding in return for an equity stake in your business, some also have lots of experience of running successful businesses and can offer much more expertise to you.
To win over an angel investors, the entrepreneur need to prepare business plan for funding and put together a tight pitch with realistic growth projections.
An asset-based loan is not giving an equity in your business, but a loan backed by your business assets such as property, premises, equipment and inventory. You borrow money against an existing possession, and, if you can’t meet your obligations, the asset is repossessed.
Asset based finance can be very good and useful for a company needing a quick injection of cash to grow the business.
Factoring has a simple premises, where you engage a factor who will take control of your unpaid invoices and takes responsibility for the debt before they even paid. The Factor company releases the funds from these invoices and then it is up to them to chase for payment for the debt, not you.
This method can speed up cashflow for your company and give you time to focus on running your business instead of chasing debts. Factoring will however lower your profit margin, as a factor will charge on each invoice. So if the invoice is for £100, the factor could release £98 to you, and when they are paid £100 their fee is the £2.
Whichever method appeals to you, depends really on your business growth and goals. You may wish to keep equity or you may be happy for investors to become shareholders. Our team of specialists at Zientek Global can help you navigate around all these options and choose the best funding for your business growth. Give us a call or send an enquiry and one of us can call you back.
This article does not constitute any advice. Zientek Global Ltd is not responsible for any loss or damage incurred by readers of the blog.
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