If you’re dreaming big for the future of your business, you’ll need some extra oomph to fuel that growth. Whether you want to supercharge production, acquire another company, or simply enhance your cash flow, securing the right funding is crucial. But fear not, intrepid entrepreneur! There are numerous ways to obtain the necessary finance, each with its own quirks and advantages.
But wait, before you charge into the funding arena, you’ll need a pitch that can move mountains! The stronger you can communicate your business’s prospects, the more likely you’ll attract those investment heroes.
{ Check out FundingHero’s Pitch Deck Canvas in the FundingHero platform and Pitch Preparation pillar to get your ducks in a row)
Why raise funds for business growth?
Every hero needs a reason to embark on a grand adventure. For you, it’s the pursuit of business growth. No matter the size of your aspirations, the ability to convey your business’s potential with gusto is the key to attracting investors. Prepare yourself for the battles ahead, craft an irresistible business pitch, and watch the funding dragons flock to your lair.
Different Sources of funds for Business Growth
Prepare to be dazzled by the plethora of funding options at your disposal. They can be roughly divided into two categories: borrowing money for future repayment or selling equity shares in your company. Within each category, a universe of funding possibilities awaits, but the ideal choice depends on your unique circumstances. Consider factors such as the size of your company, the amount of funding you require, the nature of your growth plans, and how much control you want to retain.
Choose wisely, for your selection will depend on your business’s size, funding requirements, growth plans, and your desire to retain control over your empire. Let us unveil these funding options to help you decide how to fund your business for future growth.
Funding your business with Loans and Debt
Venture forth into the land of loans and debt, where bankers reign supreme and collateral is the currency of choice. Your potential allies in this realm include: Bank Loans and P2P Lending.
Bank Loans: These financial behemoths offer small business loans, typically ranging from £1,000 to £50,000, with relatively flexible repayment terms. Securing a loan can be a Herculean task, akin to securing a mortgage, except even more challenging. You must prove to the banks that you’re a worthy investment and will repay as promised. Present them with a watertight business plan, complete with figures and forecasts from your trusty accountant. And don’t forget to showcase the assets you’ll acquire if you’re buying a business—they can be your secret weapon.
Different types of business loans:
Startup Loan: Behold, the grandeur of the startup loan! This mighty financial weapon offers a larger sum, repayable over an extended period (usually 1-5 years). It’s the ideal choice for those embarking on epic business journeys, providing the necessary resources for conquering new horizons.
Working Capital Loan: Brace yourself for the working capital loan, designed to equip your business with the power to finance capital expenditure without facing daunting upfront costs. With this weapon in your arsenal, you can seize opportunities and fuel growth without emptying your treasure chest.
Bridging Finance: Enter the realm of bridging finance, a short-term, high-interest loan crafted to bridge the gap until more long-term financing arrives. It’s like a trusty steed that carries your business through uncertain times, providing temporary relief until your larger financial quests are fulfilled.
Invoice Financing: Prepare to unlock the potential of invoice financing, where your business can unleash the power of its unpaid invoices. By selling these invoices for a percentage of their true worth, you can swiftly access the funds you need, transforming a cash-flow conundrum into a triumph.
Asset-Based Finance: Behold the might of asset-based finance, a force that eases cash flow challenges and supports capital investments. This formidable ally allows you to secure financing by leveraging assets your business proudly owns, such as property, equipment, inventory, and machinery. Let your assets unleash their hidden power!
Peer-to-Peer Finance: Enter the world of peer-to-peer (P2P) lending, where small businesses meet eager savers looking to make their money work harder. It’s like a financial love connection made online. You can apply easily, borrowing anywhere from £1,000 to a jaw-dropping £1 million. Repaying a P2P loan resembles a dance with a bank loan, complete with an upfront agreed interest rate. But tread carefully; if you stumble on repayment, the usual debt rules apply.
The Kingdom of Equity – Funding business by selling equity
For those brave enough to share their power and forge alliances, the realm of equity funding awaits. Here, mighty investors seek promising businesses to nurture and empower. Your potential allies include:
Angel Investors: These celestial beings, often high-net-worth individuals, sprinkle their wisdom and funds upon early-stage businesses. They might just be the guardian angels your business needs.
Venture Capital: Venture capitalists dwell in a realm of immense wealth and ambition. They can provide substantial funding for your high-growth start-up, but beware, for they demand a significant share of your kingdom in return.
Crowdfunding: Unleash the power of the masses and embark on a digital-age adventure. Rally the support of ordinary people who believe in your cause and watch as thousands of micro-investors propel your business to new heights.
Using your own money to fund the business growth
If you have some savings, you might decide to fund the business yourself. Don’t forget the strength that lies within your own domain.
If the business is registered as a company, then one way to inject some of your own cash into it is by investing in share capital by buying further shares in the business. This however, does tie up your money until you decide to share those shares in the future.
If you want to temporarily lend the money to the business to fuel growth, then you can do that and have that money paid back to you when it is needed or practical to do so.
Asking Friends and Family
Ah, the allure of turning to your trusted inner circle for financial support. Borrowing from friends and family can offer terms more favourable than traditional bank or government loans. But beware, brave entrepreneur, for caution must prevail before treading this path.
While the promise of friendly financing seems tempting, tread carefully to avoid a labyrinth of confusion. Clearly define the nature of the funding: is it a gift, a loan, or a donation? Ambiguity in repayment terms can sow the seeds of discord, eroding the very relationships you hold dear. Treat friends and family as you would any other investor, my friend.
So, summon your diplomatic prowess, present your business vision with clarity, and establish a rock-solid agreement. With open communication and mutual understanding, you can transform your allies into trusted investors, forging a path to success while safeguarding those precious bonds.
Granting Your Wishes – Small Business Grants
Hidden within the kingdom lies a secret treasure: small business grants. These magical gifts from the government can cover various expenses for startups and small businesses. Unlocking their power requires navigating a maze of applications and qualifications, but the rewards can be great for those who succeed.
Government grants are usually made available for startups and SMEs for things like the IT equipment, tools, or premises.
They often have a strict qualification process, plus an extensive application, but definitely worth exploring your options, and especially if you are just starting out. There are numerous grants available in the UK and here are some that might get you started in your research:
Grants in United Kingdom: Business Finance Support Finder
Grants in Wales only: Business Grants
Grants in Scotland only: Funding opportunities
Now, choose your Funding Superpower!
Now that you’ve journeyed through the funding landscape, it’s time to make your choice. Consider your long-term goals, weigh the risks, and decide whether borrowing or seeking investment aligns with your heroic aspirations. Will you retain full control and bear the burden of repayments, or will you share the spoils of growth with your noble allies?
Remember, brave entrepreneur, your funding quest is a grand adventure, filled with triumphs and challenges. Embrace the journey, master the art of funding, and let your business soar to legendary heights.
At FundingHero, we have 6 pillars of fundraising framework to help you get funded faster – You will have learning carousels, fundraising trackers and calculators at your fingertips, to get your fundraising efforts off the ground in no time. Sign up for the free plan today and get started on the Fundraising Planner.
