Five funding tips all small businesses should know

Five funding tips all small businesses should know

Without doubt Covid has brought unprecedented challenges to our economy, but it’s not uncommon to see a boom in innovation and creativity during times of crisis. According to the latest Commons Library Research Briefing, new business openings across the UK have held up over the past year and new company incorporations were higher than average, perhaps due to people seizing opportunities arising from the pandemic.

Whether you’re the founder of a new start-up or a small business, it will soon be apparent that finding the funds to get ideas off the ground or to support expansion will inevitably become a core part of your day-to-day moving forward.

However, before embarking on the journey of raising external funding, first you need to check in with yourself and assess your attitude to risk.

A few questions I would always ask are:

  • Am I happy to bring in a partner and dilute equity? If so, how much am I comfortable to give away?
  • Am I happy to have debt? And fully understand the risk of not paying it back?
  • What’s the risk if I don’t raise the funds and can I live with that?
  • How big could this business be and do I want to drive for that vision?

You can raise money in a variety of different ways, but each comes with its own positives and negatives, so it’s important to have a good grasp of what you are willing to sacrifice. 

As someone who setup her first business from her sister’s conservatory and having now set up several insurance businesses in the UK and in Australia, I am no stranger to the challenges of trying to find external investment. I have a fair few battle scars to prove that it is by no means easy, but twenty odd years of being in business later, I have now some useful learnings under my belt which hopefully you’ll find helpful.

Firstly, work out how much you think you need and roughly what you will be spending the cash on. If you are willing to take on debt, make sure you are comfortable your ability to pay back without crippling the business.

If you are looking for an equity partner, I would consider getting help putting an investment deck together, there are a number of advisors out there who would be happy to support, often only taking a fee upon successfully raising the capital.

If you don’t want to dilute your stake in the business, explore all other options first, there are several government grants available for the right type of businesses ‘ check whether you are you eligible for any of these. Bank loans are also an alternative to equity, but they will likely want some security over the debt.

Family and friends are a gentler alternative to outside investment but not everyone wants to mix personal with business. If you decide to involve them, make sure everyone is clear of the risks associated and you are all on the same page with the potential downsides.  

Finally, if you are ambitious don’t think of yourself as a small business, think of yourself as an early-stage investment that with the right support can grow into a much bigger business ‘ the possibilities are endless!

Sam White
Sam White

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