While a number of people might have an idea for starting their own business, one of the biggest hurdles they face in getting it off the ground is the financing of it. Fortunately, there are a number of options available these days, including an increase in “alternative” sources of finance that small business owners might want to consider.
Most financial institutes have a small business adviser who will be able to take you through the pros and cons of a variety of loans and financial packages that are available on the market today. If you have a proven financial track record, then guarantee loans, where you deal with banks signed up to this loan scheme, are one option to consider. Fixed asset loans are another option, but both of these schemes look at businesses or individuals who can demonstrate an established cash flow analysis over the past 24 months. If you have managed to get the business started and now want to move on and develop it further, then this is one route to consider.
Google started this way, with investors putting money into their product, typically individuals who have strategic business experience and who are looking for around a 20-25% return on the money they invest. Along with their financial input and experience, they also bring the benefits of their business contacts and networks. However, finding the right angel investor for your company and especially the ethos of your business is not easy, and careful research is required to identify such individuals, as well as knowing the correct way to approach them.
This can be broken down into two very distinct products – invoice discounting and factoring. Both are aimed at providing a steady cash flow to small businesses without taking on additional debt. The factoring service offered by funders sees them chasing up unpaid invoices, freeing up the small business owner so they can get on with running their company. If you choose the invoice discount service, then you follow up the invoices like you would normally, but use the finance facility provided by the funder.
This is where interested members of the public pool their resources and invest in your service or product via a crowdfunding website such as Kickstarter or IndieGoGo. Money is raised usually without the crowdfunding organisation having an equity stake in the business, but you will need to check the fine print for the full list of terms and conditions.
As with everything that has to do with your small business, before signing on the dotted line, always speak with your small business adviser who will be able to explain these schemes to you, as well as provide insight into other ways to finance your company.