Finance can be a real barrier to the sustainability and growth of an SME, with we at Business News Wales eager to share the many possibilities now available. Here, we have compiled a list of both conventional and new-age lending options that could potentially aid your business' success.
Grants and regional funding
Nowadays, there are a plethora of grants and funding options, especially in Wales! Though many are geared towards start-ups as opposed to scale-ups, Welsh Government are constantly promoting new ways in which they can support Welsh businesses of all sizes and ages.
Some programmes are restricted to specific applicants, such as local authorities, businesses or voluntary organisations, though others are open to individuals. If you are an SME looking for grants and other funding options, be sure to use Welsh Government's tool; the ‘Business Wales finance calculator'.
Alternatively, SMEs can make use of Finance Wales; a reputable fund manager that is currently offering 10 different funds in Wales. Finance Wales can also syndicate/co-invest to ensure an SME has the capital it needs to push forward.
As arguably one of the most utilised methods for raising funds, giving away equity in your business in exchange for investment could be an avenue to explore. Though many do not like the idea of diluting their shares, it is essential that you weigh up the pros and cons of such a structure. Just remember, 100% of nothing is nothing.
Venture capital and angel investment networks are the two main equity funding routes available to small businesses. However, it is important that before liaising with potential investors you can clearly define what their return will look like, having a transparent business plan that defines both financial projections as well as the timeframes in which each milestone will be met.
Another common way to raise finance for your SME is through debt funding. This refers to borrowing money that needs to be paid back at a future date with interest. The most common options available to SMEs are bank loans or overdrafts.
Though borrowing from an outside source boasts its pros and cons, it is vital that as a business you explore them at length. For instance, debt financing allows you to maintain ownership of your company, but at what interest cost?
With new global capital regulations designed to make banking more stable, obtaining such finance can be difficult at present. For this reason, in Wales we are experiencing a new wave of start-ups and SMEs looking at Peer-to-Peer lending options.
Fintech (financial technology) has breathed new life into the UK finance market, with crowdfunding platforms such as Seedrs and Crowdcube giving SMEs a new, alternative funding option. These platforms essentially market your investment opportunity on your behalf, having a fully-vetted pool of investors seeking opportunities. Investing any amount they so wish; the avenue uses the power of technology as a networking tool.
Though this will be in exchange for equity, as the business you have full control over what that agreement looks like, outlining share structures and returns prior to kick-starting the funding round.
If you are a SME looking for advice and support, be sure to stay up-to-date on our dedicated ‘Raising Finance' channel.