Funding For Small Business Owners

Options For Small Business Financing

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Funding for small business owners can be a major obstacle. Every new business needs money when starting up. 

You will need to meet your start up-costs and have additional liquid funds available to keep your business a float until you start to make a healthy profit.

As with any new start-up, there will be unforeseen circumstances and teething problems where you will have to fork out money that you did not anticipate.

Luckily for you, there are various options available, but choosing the right small business financing option is essential. 
 

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Funding for small business owners options are:

Self-Financing

If you are in a position to self-fund your new business then that is fantastic.  However, some people won’t be lucky enough to be in such a position.  Or, you might be able to self-fund part of your business and need to borrow the remainder.

If you are short of cash you could consider the following:

• Getting a mortgage or second mortgage
• Getting an unsecured loan or borrowing on credit cards
• Selling any possessions or assets

Borrow from Friends and Family

You might have friends or family members where they are in a position and are willing to lend you money.  While this is good, as you need not borrow any money from a bank, there are implications to this form of borrowing:

• You might feel under pressure to pay them back
• They might worry if your business is going to succeed or not and if they will ever get their money back
• What if your business starts to struggle and even fail?

If you do borrow large sums from friends and family, consider taking legal advice and even have a Solicitor draw up an agreement for you.

Small Business Bank Loans

Bank loans are generally the most popular choice for funding for small business owners as a way of start-up capital and for paying for assets, such as vehicles and computer equipment.

You will have to present your business plan to the bank in order to secure a loan for business purposes.

Obviously your local banks and building societies are a good place to start shopping and comparing rates. Or, thanks to the Internet, you could shop online where you will be presented with a much larger number of loan lenders.

For larger amounts of money you will probably have to offer security in order to obtain a loan.  This generally is against your home.  These are more commonly known as ‘Home Owner Loans’.  But please be careful and don’t put your house at risk.

Personal Borrowing

If you don’t want to go down the road of a business bank loan, then you might want to consider a personal loan. 

Again, you can shop around all the banks and building societies in your area.  Or alternatively shop online.

Grants and Government Support

Another popular small business financing option is in the way of Grants and Government Small Business Loans. 

Grants to help with business development come from a variety of sources including the Government, European Union, Regional Development Agencies, Business Link, local authorities and some charitable organisations.

Please note that this is within the UK, but I am sure that there will be similar schemes and organisations available in other countries.

So as you can see there are quite a few options for funding for small business owners.  However, the main ones will be grants and loans.

Also see Small Business Insurance


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