When you're a business owner, you are the one in charge of finding funding for it, and that is always going to be something you need. All businesses require capital, and especially if your business is small or just starting out, chances are that you are in serious need of money to keep going. Luckily for you, there are numerous ways for you to raise the capital you need, so here are some tips for your cash strapped business.
The primary means of injecting capital into a business of any size is to find an investment opportunity. People can be willing to invest in your business, in the hope that they will make a bigger return on their investment in the future, once your company grows and makes profit. As an owner, you are probably the one looking for investors.
It's fortunately easier and easier to find investment opportunities, because there are even accessible lists on apps. You have a list of investors that match up with your business, so you can find someone who may be interested in putting money into your company.
Business loans are a no-brainer: if you need money, you get a loan. This can be an excellent financing solution, because it allows for a wide range of borrowing options.
You can get a secured or unsecured loan, which, in turn, will determine how much money you can get. A secured loan is one where you provide an asset as collateral in order to secure the loan; an unsecured loan does not require collateral, but it is usually based on your credit score.
The amount you can get will depend either on the value of your asset, or on how good your credit score is. You can generally get anywhere from £1,000 and £3 million, to be repaid from 1 month to 15 years. Experian has a business loan calculator you can use.
Something to be aware of with unsecured loans is that the interest can be quite high. While secured loans allow you to borrow higher amounts of money with a lower interest rate, you also risk losing your asset, should you default on the loan.
Business cash advance
Of course, you can always get a business cash advance, which works a bit differently, in that repayment is much more convenient and affordable. You don't need to provide collateral, so you are not risking any assets. Your credit score is actually not important either, so if you have bad credit, you can still get an advance.
The way an advance is set up is that you get an advance amount based on the income you make from sales with debit cards or credit cards. Repayment is not made in regular, fixed instalments, but through a fixed percentage from these sales. Repayment is made automatically at the end of the day or week.
The advantage of an advance is that you only pay back amounts that are proportional with your income. If you make less, you pay less, and if you make more, you pay more. That ensures affordability, and should make it easier to repay the advance. Drawbacks include the fact that the lender has access to your accounts at all times in order to take the money out.
If your business is a small start-up, you may be able to benefit from a start-up loan. Start-up loans are accessible by businesses that are growing, and offered by the government. You can get from £500 to £25,000 if you apply for this type of loan. Something to note is that while this is meant for your business, it is not a business loan. This is an unsecured personal loan that you get in your name.
In addition to the money, you can also benefit from guidance and help, free of charge, for things like writing your business plan. You get 12 months of free support and mentoring. GOV.uk has more information on this topic.
All in all, even if your business is struggling financially or otherwise in trouble, you can certainly find ways to finance your company. Typical business loans are always a good solution, if you meet the criteria for eligibility, but you can also look into something like a start-up loan offered by the government, if you qualify, or even a business cash advance, if you cannot find an investor.