When you have a great new business idea or have thought of ways to profit by expanding an existing business, accessing the right finance you need to make the step is as important as making sure your plan works. Borrowing rashly could cripple your business with excessive costs. Apply for grant funding and you can miss the opportunity while battling with red tape. Planning how you will access finance is not easy if you don’t know your options and there are many grant providers to turn to rather than one central agency, which makes it confusing. Similarly, lenders are ten a penny to credit worthy businesses, but easy access money is also available to those struggling to gain finance from the banks or looking for a quicker option.
The Grant Funding Process
There are two types of grant common in the UK.Those are ‘matched’ or those that provide ‘unmatched’ funds. Matched funds mean your awarded grant must be matched by funds from another source. This could be your personal investment, investment from a third party or equity loans from someone like and angel investor. One of the best ways to find funding is on the government’s Business Finance Support Finder. If you don’t find what you need through the government site GRANTfinder has a great database that covers every sector in the UK.
The first thing any grant application requires is a business plan with solid cash flow forecasts and profit and loss accounts. If your business is very young or still at a concept stage, you will need to make predictions based on market research to fill in these spread sheets. Making accurate and realistic forecasts is critical to the success of your application.
Processing your Application
Remember that red tape? This is the only downfall of the grant route to business finance. You need to understand the aims of the agency providing the grant because that can help you tailor your proposal. You can’t simply tell them what they want to hear and then use the money for something else, but if you have used the government support finder or GRANTfinder links above, you should have access to funding that suits your needs. Be warned, hardly any funding is available from any agency if the business is based in retail.
The timescale for grant funding can vary from grant to grant, but you will need lots of patience. For grants that access European funding, a twelve-month application process is not uncommon. Local grant providers are usually much quicker in most circumstances.
Alternative Lending Options
The rise in alternative lenders has opened up access to funding that did not exist previously, but not all lending is suited to all types of business. Asset Finance requires assets of course and invoice discounting or invoice factoring depends on the business providing products or services on credit, which excludes much of our high street. A business cash advance relies on the business using card transactions when making sales.
Although grants are available for established businesses that wish to expand, borrowing is often the first choice because it provides quicker access to funds than lengthy and bureaucratic application processes associated with grants. The best way to fund your business will depend on your need to access funds quickly, your business’ ability to make repayments or your need for low cost funding. If you are able to borrow on the strength of your card sales, you could benefit from the flexible repayment process used by Business Cash Advance. With all of these types of funding repayment remains as a percentage of card sales rather than adhering to a fixed repayment schedule.
Nicholas Moore is a journalist and finance writer who specializes in small business topics. He is currently helping Business Cash Advance produce a helpful resource hub for small and medium business owners.
Image courtesy Barry Pousman