4 tips for alternative funding
With so many sources of alternative lending open to small businesses, where do you start and what do you need to help you secure finance?
According to a recent report on Future Trends in UK Banking, the alternative finance industry is projected to be worth more than £10bn by 2020. Alternative finance is so significant for small and mid-sized businesses, where the traditional credit environment has proven challenging since the economic crisis.
With the emergence of so many alternative lending services, navigating this new landscape is a daunting prospect for small business owners. However, with the right knowledge and a solid plan there is a smooth route to success, and many businesses will go on to secure the type of funding that best suits them.
It’s absolutely vital to get your numbers and requirements right at the start. Pinpointing exactly how much you need to borrow and how much you can afford to pay back within a defined timeframe is key to starting out on the right foot.
If you have a solid business plan in place, this will help you to prepare financially and help you ascertain exactly how much funding you require. Allocating precisely where in the business this money will go is also a wise idea. By knowing where every penny will go, you’ll be in a strong position to select the right provider for your individual requirements.
Documents at the ready
While alternative finance providers might not be as restrictive as the banks in terms of the multiple forms, face-to-face meetings and extensive background checks required, they will certainly want to know about your business’ financial fitness.
Considering your monthly revenues, how many sales you process, how many credit card transactions you make, and other similar figures is a good starting point. They might also ask to see bank statements, VAT returns and company accounts, so get into the habit of storing these away safely.
Be realistic about what you are able to take on financially, avoid taking on a loan that will add extra stress each month or giving away equity you are uncomfortable with.
This is where the value of a solid business plan is particularly evident; if you know the business’ outgoings, and when in the year you may have to commit to more expenditure, you’ll be able to take on funding that you can comfortably pay off.
Compare the offers
Taking a measured approach is important when setting out to gain funding. With so many options, it can be easy to get carried away and excited with all of the avenues.
However, it has become a competitive industry, so check through your options with an intermediary. An online personal comparison site will help you to find the most suitable option for your business.
Many small businesses and start-ups claim a lack of knowledge about alternative finance with 58% reporting they wouldn’t know where to find alternative finance. But by following these steps, and adhering to a strategic plan, there is no reason why your business can’t secure the funding it needs.
Sharon Argov is the co-founder of Fundbird, a comparison site that enables you to assess your business loan options. www.fundbird.co.uk