Start-ups and small businesses are the lifeblood of the UK economy. At the start of 2014 small businesses accounted for 99.3% of all private sector businesses, 47.8% of private sector employment and 33.2% of private sector turnover in the UK.
It can be difficult to get a new business up and running however, much less keeping it competitive and making it a long-term success. It all starts with a great idea or the identification of a niche. Then comes the meticulous working out of details and the drawing up of a viable business plan.
And then… well, that’s when many entrepreneurs hit a brick wall when looking for funding to get their idea off the ground. So, what options do UK entrepreneurs have?
The Funding for Lending Scheme (FLS) was established in 2012 with the intention of giving new and existing small businesses access to mainstream bank credit. The scheme was extended again in the Autumn Budget to run until January 2016 but many SMEs are still finding it difficult to secure funding from the banks.
As Ross Cocker, corporate partner at Birmingham-based accountancy firm Clement Keys pointed out:
“While a good idea in theory, getting access to loans is still a frustrating area for many businesses and SMEs have long since started to vote with their feet by opting for alternative lending such as crowdfunding. The bottom line is that fewer companies are using traditional bank loans and many firms still feel they are hard to come by.”
Crowdfunding and P2P lending
Crowdfunding is one alternative and along with peer-to-peer lending, it’s one that has grown in popularity over recent years. With crowdfunding you are essentially asking a lot of people to each provide a small amount of funding, arranged through an online intermediary or crowdfunding platform. Peer to peer (P2P) lending is similar, but aims to match individual borrowers to private lenders or investment groups.
There are, of course, pros and cons that come with crowdfunding. Due to some issues, especially in the area of Intellectual Property (IP), crowdfunding is an option that you should approach with caution.
Specialist business lenders
You could also approach specialist business lenders who are often centred in their own geographical locations. When looking for business loans St Albans or other Eastern England-based businesses could, for example, try a lender like Foundation East, who can also offer additional help such as business plan templates and business support once a loan is awarded.
For this option, you need to do your due diligence to learn about the reputation of the lenders. You can do so by doing your own research, checking with the local chambers of commerce, and by asking for personal recommendations from fellow entrepreneurs.
Securing funding is not always easy but if you have a great idea and a sound business plan there will be somebody out there who will view you as an investment rather than a risk.