Raising finance for small businesses

Small Business AdviceYou’ve got a brilliant idea, you know the market’s eagerly waiting for your product or service to go live and you’re excited about the prospect of becoming the next Richard Branson. But there’s one thing that could scupper all of those ambitions – money.

Late last year, the Federation of Small Businesses carried out a survey that showed around 42% of small businesses were struggling to finance their operations and when applied for a loan were turned down. So our first tip to financing your business may seem a little contrary:


#1 – Talk to your bank

Yes, we know things are still tough out there, but banks are starting to loosen their purse strings just a little and investing in small businesses more willingly. There are no guarantees and each application will be assess on a ‘case-by-case’ basis. But if you’ve got a strong business plan and good financial forecasts that are realistic too, then you’ve got a good chance of getting that all-important business loan.

But, there are a couple of provisos to getting loans to finance your small business:


#2 – Know the legalities

Even if the equity you raise comes from family and friends, you will need to comply with the Financial Services and Markets Act 2000. This offers your investors a level of protection should things go wrong. Contracts, even if you’re borrowing £500 from your dad to get started, are a smart idea. You must also ensure that you’re complying with all HMRC requirements too.


#3 – Never make a personal guarantee on a loan

Keep personal and business separate – avoid using personal assets as a guarantee on a business loan. Do you really want to risk losing your home for the sake of a £5,000 investment?

But if the bank says no and you’ve maxed out your favours quota with friends and family, where else can you raise some finance? Try our last two tips:


#4 – Knock on the Treasury’s door

In an attempt to get the economy moving again the government does have a series of loans and grants available for businesses to take advantage of. Check to see if you qualify by visiting www.businesslink.gov.uk


#5 – Find yourself an Angel Investor

Angel investors are successful businessmen and women who look for small businesses to invest in. Not only do they provide you with the money you need, but you’ll get the benefit of their expertise and their considerable market influence too.