Funding options for SMEs

The finances of most small businesses entail both highs and lows.

Where and when these occur, depends on the nature of the business, the person or people running it, and external factors such as market fluctuations, issues with supply chain, or changes in legislation for example.

Whether the going is good, and growth starts to occur due to increasing demand, or if times are tough and sales are slow, a cash injection can be the saving grace that enables a small business to realise its full potential.

Decisions, decisions, decisions…

While there is a finite amount of funding options that are available for small businesses, there are also an ever-increasing number of alternative finance providers entering the market. Presenting greater choice for cash strapped businesses to choose from in times of need.

Knowing what type of finance or funding provider is right for your business is no easy task. We recommend that business owners seek expert advice in order to gain a clear understanding of the options available to them, and the broader implications of utilising various financial instruments to accommodate their needs.

Bank Loans, Overdrafts, Crowd Funding, Peer to Peer Lending, Angel Finance, Venture Capital, Asset Finance or Asset Lending each come at a cost to businesses. With some of these options being more expensive and/or feasible than others. What the exact costs will be, is largely dependent on the business’ financial position at the given time, its creditworthiness, affordability and track record.

The irony is, when a business is struggling and in most need of finance, it’s also the most difficult and expensive time to raise capital. So, it’s important to check the total amount you’ll need to repay, including arrangement fees and interest, prior to entering any agreement.

Debt finance is the natural choice for many small businesses. However, from experience we know that a surprising number of SME’s have never received, or have never considered applying for, business growth grants.

The precise reason for this is unclear. In the capital, where business grants per se, are very thin on the ground, it can take expert knowledge and advice to uncover potential grant opportunities for small businesses. However, outside of the capital, where numerous small business growth grants are available, more often than not, it’s down to a lack of knowledge or information about potential sources of funding.

Other factors such as uncertainties surrounding eligibility criteria, or lack of understanding when it comes to how to complete a successful grant application, are also deterrents.

Many small business owners are simply unaware of free services they can utilise to assist them to grow and identify grant opportunities. Or some tend to be sceptical about the nature of support they are likely to receive, and the overall benefits this can bring to their business.

Most sources of grant funding, particularly in the growth funding arena, will not cover the full cost of a project. They typically tend to agree to cover between 30 – 70% of the amount required to fulfil plans for growth. Usually on the proviso that the project will also create local employment opportunities. Meaning businesses still need to cover between 70 and 30% of costs themselves. While most growth funds still leave businesses in need of raising extra capital, they also reduce the overall amount they need to borrow to achieve growth plans in the long run.

Putting plans into action

Before applying for grant or debt finance, small businesses need to give themselves the best possible chance they can to raise the funds they need.

This means undertaking a reality check and being honest and transparent about the current business position, the amount of funding required and what additional funds will be used for. Business development plans are a very good way of conveying this information, however many business owners often lack the time and resources to work on one. In these instances, it becomes even more paramount to seek professional advice. It is also advisable to ensure that business accounts are kept up date, as these records will ultimately play a big part in what, if any, funds can be raised.

Most Local Authorities will have a business development service available, wherein local businesses can receive impartial advice and support free of charge. There are also a number of other business support organisations across the UK who may be able to assist.

By contacting your Local Authority, or carrying out a simple Google search you will soon be able to ascertain various sources of support that are available locally. Alternatively, if you have an accountant or financial adviser, they may also be able to point you in the right direction.

How Newable Finance Can Help

At Newable Finance we believe business finance should be fairer, easier and more accessible for companies of all shapes and sizes.

With regional offices in Manchester, Bristol and London, we work with an extensive panel of lenders to deliver brokered finance solutions to improve cash flow, spread the cost of expensive equipment and fund property transactions and development.

Our growing team of experienced advisers provide support to SMEs of any size, in any sector, with a range of products including business loans, invoice finance, asset finance, commercial mortgages, development finance and life insurance.


Find out how we can help your business