For small to medium sized businesses, being turned away from banks for money is very much a reality. However, there are other ways you can raise income, and despite popular belief, these do not always come at the cost of shares or a stake of your company. Alternative finance is becoming increasingly popular for businesses, especially those in the hospitality sector. There are several finance options you could consider if you have exhausted the banks of your friends and family and if the banks are unwilling to fund your request.
The Business Plan
Before anticipating your search for extra funds, it is imperative that you have a coherent business plan with clear financial forecasts and predictions. Banks and external funders turn thousands of business owners away due their business plan and its lack of coherency.
Working with accountants or advisory services that can assist with your business plan, makes it more valid and easier for banks/funders to trust it. Once you have a thorough plan in place there are several alternative finance options you could consider, such as:
Specialist Short Term Loans
A common mistake that many businesses and start-up companies make is requesting significant sums of finance, and not allocating in detail the use for it. If the finance you need is for a specific reason, such as refurbishments, assets or expansions, a specialist short term loan may be more effective. These specialist loans are more likely to be approved by a loan specialist, rather than a bank, as they handle businesses who have intended use for the money. What is more, specialist loans tend to be processed much faster and quicker than bank loans.
Invoice trading looks at selling your invoices in order to release cash quickly, helping with short term debts and improving the cashflow and liquidity of your business. Over 80% of UK SMEs are said to have problems with their cashflow and liquidation, which is why invoice trading is the ideal solution. What is more, funds can often be accessed within 48 hours. One company worth looking at in regards to this is Market Invoice.
Crowdfunding and Crowd Lending
Crowdfunding is becoming an increasingly popular way for businesses to raise finances from a large number of people. This type of alternative finance can work particularly well for hospitality businesses that are part of a large community or may have a positive impact on the development of a local community.
There are different types of crowdfunding, however, for the hospitality sector the most popular are:
- Equity/ Investment Crowdfunding: Investors will fund capital into the company for a stake of the business or increased interest on repayments. This type of crowdfunding is common with small or start-up businesses.
- Donation Crowdfunding: Where smaller amounts are raised by individuals in order to reach a larger funding aim or project. With this type of crowdfunding there is no financial exchange or benefit for the person who donated. This is more common with project based businesses.
Grants, Funds and Schemes
With at least 99% of businesses in the UK considered an SME, it is no wonder why there are many governments–led and privately run grants, funds and schemes available for small businesses. This includes the popular Enterprise Investment Scheme(EIS), which helps small, high risk companies raise finance through equity or the Business Angel Co-Investment Fund, allowing easy access to angel investments for SMEs with a high growth potential. Although applying for these grants and schemes can be fairly extensive, if won, you can benefit from large sums and also valuable, beneficial advice and support to guide your business further.
There are other types of alternative finance which may directly be of benefit to you. If you would like to discuss your options or find out more information, please contact Adam Moody at firstname.lastname@example.org.