How to Raise Funds for Business Growth

Do you have big plans for your business that may require some funding? It’s essential to have a strong business pitch as you will be more likely to receive the investment.

There are a number of ways you can raise money which are divided into two types; money that is borrowed that needs to be repaid at a later date (bank loans or peer-to-peer lending)  or sell equity shares in your company (angel investors, venture capital or crowd funding) .

The most appropriate funding will  all depend on your business circumstances such as, how much money you will need, the size of your business, how big your growth plans are and how much control of your business you’d like to keep.

Let's find out more about each option that could be available to you

Bank loans

High street banks can offer small business loans from £1,000 to £50,000. The hardest part is securing the loan, this is where your business pitch comes into play. You need to ensure that you demonstrate that the plans you have in place will be enough to pay the loan back and grow your business along with how the funding is going to be used. The lenders will want to see figures and forecasts built into the pitch by your accountant.

Peer-to-peer lending

Peer-to-peer (P2P) lending can be applied for online. This is connecting borrowers to lenders directly.  The loan is drawn from cash pooled by savers who are looking to get a better return on their money. The lender will post a financial profile that is assigned a risk category that shows the interest rate the applicant will need to pay. The lenders will review all applicants' offers and can accept an offer.  The loan and payments are handled through the platform. If you struggle to repay then the usual rules about debt apply.

Angel Investors

Angel investors are high-net-worth individuals who will invest in the early stage of businesses. You can expect them to invest anything up to £1 million, they will invest in exchange for a share of the business. For angel investors they need to believe in your business plans so you need to have a watertight business pitch. Angel Investors may come with some valuable expertise in your brand's area that can be just as powerful as the money they are investing in your business.

Venture Capital

A venture capital (VC) is the next step up from angel investors. You will often approach a VC firm when  you are needing more than £1 million in exchange for a large share of your business. Often businesses have gone through many rounds of funding to become profitable. It is a competitive area so again your pitch needs to be watertight and have a faultless business strategy.

Crowdfunding

Crowdfunding is designed to help launch and support business start ups without financial support from investors. This gives ordinary people the opportunity to get behind a business and help out. All you need to do is use your online platform to share the message about your business plans and what you’d like to achieve. This is where people can contribute little amounts to the business.

Here are some crowdfunding sites you can look further into:

1. Kickstarter
2. GoFundMe
3. Causes
4. Indiegogo

Small Business Grants

You could be eligible for small business grants that are funded by the government that cover costs including; IT equipment, premises and machinery. Each grant has its own application process and a strict criteria to meet to be successful for a grant.

Check out what grants you may be eligible for - Grants in England https://www.gov.uk/business-finance-support 

What option is best for me?

It's important to weigh up the pros and cons of each option available to you. Ultimately the biggest decision is choosing between borrowing or seeking investment, are you willing to pay back once your business grows or are you prepared to share the success of your business with investors?