Tom Buckland

Alternative Funding for Small Businesses

By: Tom Buckland | February 25, 2016 | 

Alternative Funding For UK Small Businesses

By Tom Buckland

If you want to grow your small business quickly, you have to take some risk. And that risk typically means acquiring small business funding and taking on debt.

When we sit down and face the hard truth, we realize business growth is fueled by either time or money, and, unfortunately, business owners can’t clone themselves to create more hours.

Getting small business funding is the only way forward if we want to grow quickly.

That said, the reality is that traditional financing routes for small business can be extremely difficult.

It’s an uphill battle because banks and traditional lenders are fairly risk averse. They would much rather lend money to established businesses for a much safer return.

So, where does that leave the entrepreneur with a great business idea?

Usually with large, traditional lending institutions they are left out in the cold.

But with those with the fortitude to succeed with a great business idea, there are plenty of alternative ways to move forward.

In fact, thanks to technology and crowdfunding, many small businesses are acquiring nice tidy sums of money to fuel their new businesses.

Alternative Funding for Small Businesses

If a small business owner is willing to go through certain protocols and stick with it, the money is out there. But going down this route means putting on your salesman cap because you’re going to have to sell your idea.

All small business owners need to have a bit of the salesmen in them to acquire alternative funding. And not only to acquire funding, but to gain customers once you launch.

Selling your business model and idea first and foremost requires an airtight business plan that is presented in a logical and appealing way.

Next a small business owner can turn to many of the new micro loan (crowdfunding) websites that are sprouting up everywhere as these are a great source for cash.

A Personal Example

Like most start-ups, I was to the point where cash flow was preventing growth.

I needed stock for my fitness accessories business, but simply couldn’t afford them at the time.

I’m 22, self-employed and have less than 18 months in my businesses, so when I decided to apply for a small business loan, everyone did all but laugh in my face.

Although this was frustrating, it was pretty clear I just wasn’t going to be accepted for a business loan in the traditional sense.

So I searched for some alternative funding sources.

One of the first ones I found was simply using your current PayPal account.

Paypal offers loans with repayments based on what comes into your PayPal account.

There are no credit checks. It’s simply based on the activity of the PayPal account.

This was my first option and I managed to secure funding with a 10-minute application process.

I loved this method as I didn’t have to worry about missing payments.

Although the PayPal loan took off some of the pressure, I needed more than they had loaned me.

I once again tried a small business loan, but still wasn’t given the time of day.

The next step was to look into private investors.

But, like most business owners, I didn’t want to give up a large proportion of my business so I offered a small percentage of my business for an investment.

I found someone fairly quickly, worked out a deal, and three days later, the money was in my bank account.

A silent investor as well, perfect!

More Alternative Funding Options

Don’t overlook tooling and retooling your business plan because many angel investors are accustomed to looking at professional business plans.

Present your idea in the most professional way possible and show the problem you solve for your audience.

If your business model doesn’t fit these criteria, it may be difficult to crowdfund your new business. Look for the right angle.

Most entrepreneurs do at least some self-funding for their businesses, or they acquire capital from friends and family.

But you can risk relationships if your business plan isn’t airtight.

Of course you can spread the risk around to multiple parties so that you don’t really risk much of a hit to any one relationship, if you go down this route be certain that everyone realizes there is risk involved.

Self-funding your small business means building up your personal finance history, raising your credit score, and saving money any way that you can.

Self-funding is a great way to begin your UK business venture however you will very likely grow beyond that stage and need to look for alternative funding sources.

It is extremely likely that by being diligent with your own money and partnering with investors through alternative lending sources you will acquire enough capital to getting things up and running, and when the business begins to profit it will be even easier to get more funding.

image credit: shutterstock

About Tom Buckland

Tom Buckland is an independent online marketing consultant for My Local Services and HQ SEO. Providing posts and information on how to fund, grow and market small and medium sized businesses.