Most entrepreneurs and SMEs find raising capital for their businesses difficult. However, in order to be sustainable and even grow, business need access to capital. 

One of the main reasons for SMEs not being able to grow and/or fully take advantage of their business opportunities is lack of finance. This ‘funding gap’ is down to a number of factors:

    • Limited number of investors
    • Large companies and government-backed businesses have an unhealthy appetite for swallowing available funding, squeezing SMEs
    • Small businesses are seen as either overly risky, or do not have long enough trading histories
    • SMEs also might not have a historical record of funding and finance and providing evidence of being a ‘safe bet’
    • SMEs are typically run by a single Managing Director, whose decisions are often dictatorial with little or no accountability.

Business Borrowing

There are many advantages to borrowing money, regardless what stage your business is at; for example, a start-up can ensure enough capital is available to bridge the gap between opening the doors and achieving positive cashflow. For an established business it can help prepare for the next big growth opportunity.

Lenders can come in many shapes and forms; a lender is any individual or organisation willing to lend to your business, such as family & friends, banks, peer-to-peer, government or public bodies or a finance broker.

Types of Small Business Loans

Bank Loan

Bank loans can be a low cost form of long-term access to funding. However, they often require  personal guarantees or material collateral.

Peer-To-Peer Loan

Offered by the alternative lending industry where you borrow money from investors who are seeking a reasonable level of return on their investment.  P2P lending can be activated much in a shorter time than bank loans, with credit history dependant competitive rates and early repayment opportunities.

Government Start-Up Loan

Specifically, for start-up businesses and offering low rates and up to five years to pay them back.

Asset Backed Loan

A loan secured by a business-owned asset like machinery, vehicles, property, land or stock inventory. If you have substantial assets, then this is one of the easiest types of loan to establish.

Cash Advance Loan

Works by utilising future business sales in exchange for immediate funding. A cash boost at the expense of a percentage of future sales being directly paid back to the lender.