Business owners can hit financial black spots at any stage; whether a start-up or a business that has been operating for years. But what are the first and last resorts to getting funding if the bank says no?
Here Bobby Lane, an accountant and business adviser at accountancy firm Shelley Stock Hutter looks at your options and what might work best for your business.
Prepare a business plan to identify:
- How much funding you need
- What the funding is for
- The type of funding you need
- Repayment period
Then ask yourself “Is it crucial that I keep 100% control of the business?”
Many set up their own business because they want to have the freedom to make their own decisions without having to defer to a partner. However having 100% control means more risk.
Look to your own savings
It may seem obvious but I’ve met business owners who’ve been in need of funding but were very reluctant to dip into their savings. Why would anyone else lend you money if you do not believe in the business or are not willing to risk your own cash. This should be your first resort!
Asset Based Lending
If you need growth funding for working capital, you may want to look at asset based lending such as invoice discounting or factoring. This is the best form of finance for a growing business and given the reduced security requirements, it is far more likely to be available and offered to a small business.
Family and Friends
If you are in a fortunate position of having wealthy family members or friends then don’t be afraid to ask for some or all of the funding.
Remortgaging your home.
Business owners see this as their best option. However this should really be the last resort. It may be the cheapest type of loan but beware if the business does not work out as planned you could lose your home! You need to be sure how much of a loss you could survive.