Alternative Business Funding - Guest Blog

24th June 2014

Alternative Business Funding

The word 'alternative' can get you thinking of unusual or second best, after all the very definition of 'alternative' is an option against something else. As far as business funding is concerned 'alternative' relates to anything that is not bank finance.

The thing is that alternative business funding is starting to become mainstream, it is starting to become the first port of call for businesses looking to raise finance. The reason why this is happening is more enlightening.

The Stats Don't Lie

 A recent survey undertaken by merchant finance provider, Liberis, showed that;

 • 49% of SMEs are turned down for funding by their bank

• Of these, 29% said they did not know where to go to get funding

The question that needs to be asked is whether of the 51% who got their funding, did they get the best option for them as individuals and them as a business? As in life, the most obvious answer is not always the best.

The Alternative Funding Options

There are loads of options out there for businesses. Trying to show the best options is like looking through a holiday brochure, there are loads of options to choose from but until you start to set criteria and demands you cannot narrow down your choice. Funding is the same, the solution has to fit what your business needs now, needs in the medium term, and work with your plans for the future.

Probably the highest profile source of alternative business funding is 'crowdfunding'. If you want to know more about this then check out this article (http://www.limeconsultancy.net/blog/2014/05/07/crowdfunding-3) there is even a short video to take you through it.

If you think that crowdfunding is too new or untested for your business to use then consider that the first crowdfunding project was used to build the Statue of Liberty back in 1885. Slightly more established than you may think then...

The USP of Crowdfunding

Over the last few years there has been an almost perfect storm around crowdfunding. You have savers earning nothing on their deposits and businesses unable to access lending.

Crowdfunding simply acts as a middleman and puts savers and borrowers together.

The big advantage is that if you went to your bank to borrow £50k for your business then that bank would have a £50k risk. The bank would express caution, look for detailed proposals, security and would only lend to solid gold applications. After all, if it all went wrong then the bank would (in simple terms) lose £50k.

Crowdfunding does not have a single lender. Instead of one entity taking a £50k risk, that risk may be spread over 1,000 savers all staking £50. Now £50 is a lot more palatable to risk than £50k. 

Therein lies the USP. It is about spread of risk and a genuine hunger to lend. Add in to that a decision within 48 hours and cash in your account within 72 hours, loans from £10k to £1m, rates similar to high street banks, then you start to see why businesses are taking advantage.

Alternative Business Funding Summary

In short, the options for businesses has never been greater. Consider your options and take advice, the options are so varied that it pays to make the right decision.

All in all, there are some great funding options out there.

 

By Dave Farmer

 

Dave Farmer is MD of Lime Consultancy (link to http://www.limeconsultancy.net), a leading South East business finance advisory. Lime Consultancy have just been named 'Independent Crowdfunding Specialist Advisor 2014' (link to http://www.limeconsultancy.net/blog/2014/05/29/crowdfunding-specialist-a...)at the M&A Awards. Based at Gatwick they offer funding guidance and advice for SMEs.

 

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