The UK was home to 5.5 million small businesses in the private sector at the start of 2021. To be successful, businesses need to grow and make money. But funds are needed to be able to increase profitability and this can prove difficult, especially in a volatile economy.
There are a few ways small business owners can raise funds but not everyone is aware of this. If you’re just starting out or you need a bit extra to cover expenses, there are options available.
The amount you can borrow or what someone is willing to invest will depend on a number of factors including the size of your business, how much it’s worth, how long you’ve been trading and profitability.
We’ll take a look at some of the most popular ways to raise funds and help launch or grow your business.
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Personal money
If you have the funds, there’s no reason why you can’t use your own money to assist your business. There are a few options with this. Investing in share capital can increase assets but also means your money will probably be tied up for a certain length of time. You can also choose to lend your business money and have it paid back once your company can afford it.
Using personal money is a popular option with small start-ups but some business owners might not be too keen on the risk involved.
Loans for small businesses
Many small business owners choose to take out a loan. A secured business loan means businesses can borrow more money, using assets or personal property as collateral. An unsecured loan means the amount you can borrow will be less and only a guarantor is usually needed.
It’s worth weighing up the pros and cons of securing a loan against personal assets before taking one out.
Angel investors
These are usually wealthy individuals who invest in small businesses in exchange for shares or other assets. This type of investment can help a business grow and offer a good return. The downside to this is that they are quite difficult to find, although there are networking opportunities for businesses across the UK to help put business owners and investors in touch.
A big advantage, however, is that they are generally experienced individuals who can offer a wealth of knowledge and expertise to help your business succeed.
Venture capitalists
These are companies that deal in larger amounts of funding and are often used by high-growth start-ups. Businesses wishing to secure venture capitalist funding need to have a robust strategy and plan and the ability to outweigh their competition.
Government options
There is help available in the form of government-backed finance options including start-up loans and grants, depending on the size and nature of your business, so it’s worth checking to see if you’re eligible for any support.
Whichever route you choose to go down, always consider your own circumstances and the amount of risk you’re willing to take.
Source: Lincolnshire Today