Bringing a cash injection to your business can be the difference between success and failure, or on a lesser scale, huge profits and middling profits. There are a variety of ways you can approach raising finance for your business, each with their own subtleties which can have major impact on your growth plan.
Before consulting these resources, you first must be clear on why you want to raise finance for your business or venture. Regardless of whether you are starting out, growing or stressed, give yourself the thinking space to be clear on your business design and your financial forecasts. It’s a good idea to start with our guide on choosing finance, and then you can explore the options in more detail, which we have helpfully detailed below.
Build a team
It doesn’t matter if you are hiring your first employee or already have a team of 20, finding and managing staff can be a headache for small businesses. In larger companies with human resources functions, different people might manage different aspects of the recruitment, talent development and the less pleasant matters of disciplinary procedures and retrenchment. In a small business, this function is often performed by a combination of the CEO/managing director and the finance director.
Your finance options
|Equity: You give a share of the company in exchange for investment. This may come from venture capital, private equity, angel investors, or other individuals (family and friends).||Benefit from experience and network of the investors.||Required to give away equity and a degree of control.|
|Debt: Loans, bonds, guarantees. You pay interest on the amount loaned. This may come from a bank, other institutions or other businesses.||Many options available and no requirement to give up equity.||Potentially high interest rates (expensive) and businesses with little or poor credit rating may struggle.|
|Alternative: A plethora of options, such as invoice financing, asset finance and leasing/ hire purchase.||Can free-up cash and reduce needed investment levels.||Complex, rarely suitable for retail or consumer-facing businesses.|
|Crowdfunding and peer-to-peer lending: Accessing multiple small investors and lenders through technology-led platforms that also offer support and guidance.||Raise awareness of your business as well as finance.||Pulling off successful crowdfunding campaigns can be challenging.|
|Grants: Small business grants or charitable grants and donations are available to a number of organisations.||A cash award that does not need to be repaid.||Arduous application processes and difficult to find the right opportunities.|
|Bootstrapping: Self-funding and keeping costs to the minimum.||You won’t lose equity or incur high interest.||Can constrain growth based on the financial resources you have available.|