If you plan to start a new business in 2020 or take an existing business to the next level, it’s likely you’ll require small business funding.
While it would be great if you could finance your business internally through your savings or by reinvesting profits from previous years, the reality for most small business owners is that they’ll have to seek finances through alternative funding routes. The good news is that these days there are more funding options available to small businesses than there have ever been before. Here are some of the ways you can raise capital in 2020.
Make Small Business Funding Easy With These 5 Tips
1. Start a crowdfunding campaign
Crowdfunding is a method of raising finances by asking a large number of people to invest a small amount of cash into your business to help you get it off the ground. In return, the investors will typically receive shares in your business, get their money repaid with interest over time and/or have the opportunity to buy your products at a discounted rate or before they are released to the public.It is not a suitable way to raise funds for every business, but there are so many success stories out there that it’s well worth exploring.
You must create a pitch about the business or product you want to fund and upload it to one of the available crowdfunding sites such as Kickstarter. You must also state what your funding goal is and, if your product or business resonates with the public, you may reach that amount. If you don’t, it may be time to consider a different funding method.
2. Apply for a bank loan
Technology has helped to create lots of new ways to find business funding, but traditional methods such as applying for a small business loan from the bank are still just as valid. However, it’s important to remember that being accepted for a bank loan is certainly not guaranteed. You will have to create a business plan that explains what the purpose of the business is, how it will operate and how you forecast it will perform financially. The bank will also look at your credit history to see how both you and the business have used credit in the past.
Criteria will differ from lender to lender, but if you are not accepted for a small business loan from the bank then it’s not the end of the world. There are still plenty of other types of small business loans you can explore.
3. Access finance through peer to peer lending
Peer to peer lending allows a business to borrow money from a large number of private investors, typically through an online platform. This type of lending can be beneficial for both the business and the private investor, as both parties will receive a better rate of interest than they would if they had gone through the banks.
Innovative finance ISAs, also known as IF-ISAs, are an increasingly popular form of peer to peer lending. They allow investors to earn tax-free interest on the money they lend to businesses that require funding. There are excellent returns available for investors and businesses can access the funding they need at very competitive rates.
4. Find an angel investor
Finding an angel investor for your business could be a case of easier said than done. However, if your business is exhibiting rapid growth, there may be a wealthy individual out there who is willing to provide a one-time capital injection to help you through those difficult early stages. In return for their financial help, angel investors will receive a share of your business that they will hope to sell for a profit in the future.
For the small business, the main benefit of using an angel investor is that there’s no debt to repay. That means all the available capital can be used to drive the growth of the business. The disadvantage is that the business owner will lose a portion of their company. That means they will no longer have complete control over the business or be able to retain 100% of the profit it makes.
5. Apply for a small business grant
Grants are one form of funding that are often overlooked by small business owners, simply because they assume their business will not be eligible to apply. There can be strict criteria for small business grants, but you never know whether you’ll be accepted unless you try. There are a wide range of grants that are provided by the government for small businesses in many different sectors. You can find out more about the small business grants that are available here.
Start Your Search Today
Is a lack of funds holding your business back? Then start your search for small business funding today. With so many different sources of finance available, you’re sure to find something that’s a good fit for both you and your business. It’s also important not to be discouraged if you’re not accepted for a certain funding type. If you have a viable business that’s financially sound, you will eventually find a way to raise the capital you need to expand – it’s just a matter of time.
