Small businesses of today exist in a new financial landscape that forces creative thinking when it comes to funding. There are a variety of different sources when it comes to securing investment but most companies will piece together their funding from multiple sources over a period of time. No single source of funding is easier to come by than the other, it mostly depends upon how you present the company’s projections in your business plan and how well you can sell yourself to potential funding partners.
If you’re a start-up looking for an initial capital injection or an SME looking for funding to support your vision of growth, you have to remain adaptable and stay positive in your efforts. Here are four possible funding solutions to help support your company’s growth ambitions:
1. angel investors & venture capitalists
Television’s favourite dragons and angels from the den often claim that they’re able to bring a lot more to the businesses they support than simply injecting cash into the venture. Most angel investors have the necessary capital to spend on entrepreneurial start-ups and growth strategies because of their successful history of running businesses themselves. Angels are also willing to share their experiences of starting and operating a business to help give you a good understanding of the challenges you may face whilst building up a company. This is what sets them apart from standard lending institutions.
However, just because this investor has decided to inject cash into your business, doesn’t necessarily make them the right financial partner for the long run. As the business owner, you have to keep in mind that when you’re lent money from an angel, they will own a portion of your business and you’ll have a responsibility to act in the best interests of the business and the shareholders. If you choose to go down this funding route, remember that the devil is in the detail and that you must always refer back to your business plan, be clear, back up your assessment with your financial projections and build a relationship based on mutual understanding and trust.
A large number of entrepreneurs and business owners have come to realise that they may have to self-fund their business ventures and plans for growth for a considerable amount of time until their more long term and formal funding opportunities become realistic. You can self fund through a number of different ways including accessing your personal savings account, to applying for a company credit card. If you truly believe that your business plan will be successful, you should have no problem with investing your own cash into the venture.
One of the main perks of going it alone is that you don’t have to justify any of your business spending to a board or pay back any investors, which allows full control of the company. The other benefit is that when it does come round to presenting your business plan to an angel investor, they will be more comfortable knowing that you have a large stake in the business and will take you more seriously.
3. business loans
High street banks and traditional lenders can be very strict with the approval of loans unless you have excellent credit and/or a flawless business plan. But if you have neither of those, could you possibly consider taking this funding route? It’s important to do your research before giving up at the first hurdle. To prove to the banks and lenders that you’re serious about starting up or pursuing your company’s growth, you have to present a detailed business plan, financial projections that clearly show signs of profit upturn and that you’re willing to invest some of your own money into the fund to help demonstrate your commitment and notion of shared risk into the venture.
4. family & friends
Approaching your friends and family for investment is not unheard of, in fact it’s one the more popular and effective ways of rounding up some introductory capital for your business idea or growth vision. The people you hold most dear to you are going to be more approachable, acceptable and understanding around your request for funding. They will also be the best audience to explain your business plan to as they will believe not only in your vision, but your ability to make it a reality.
However, one of the potential drawbacks is that you would potentially risk personal relationships should the business venture fall through and you fail to meet your original repayment agreement structure. To maintain a strong relationship, treat this method of funding as a high interest loan for up to year and try to borrow just enough to launch your business idea or growth plan. You will want to avoid expensive legal fees, but it’s wise that all parties involved seek out rational legal advice, to avoid any potential potholes that could cost all parties much more, further down the road.
EFM Ireland are experts in coaching and supporting growing business, our team have the experience and solid methodology to drive growth and profits, maximise value controlling risks. We specialise in working with growing SME business, by a flexible part-time financial management and business Advisory service, which is scaled to meet your requirements.
EFM Ireland works with over 450+ SME businesses to:
- Enhance profit and value
- Provide clear direction – resulting in less stress
- Drive accountability and engagement at all levels
- Implement systems & processes as a strong platform for growth
Experienced Finance Director and a Qualified Certified Accountant with over 20 years of accounting experience under his belt, including raising finance, providing strong disciplines and leading companies through difficult periods. He is ideally placed both to grow the company and provide an excellent financial management to a wide range of SMEs.