£1 coin

Last year marked another landmark period for UK entrepreneurialism with more and more small and medium-sized enterprises (SMEs) opening their doors for business. According to data from Companies House 608,110 businesses were started in the UK in 2015, a new record compared to 2014's 581,173 and 526,447 in 2013.

Further proof, if any were needed that SMEs provide the backbone of the UK economy. But for each of those new businesses, how and when they grow is the next stage of this exciting journey. While there are many things to consider when looking at how to do this, one aspect that remains core to this decision is funding - How it is funded, from where, what the money will be spent on and how much it needs to borrow. Regardless of what stage your business is at, it’s a lot to get your head around.

The funding market has evolved beyond all recognition in recent times and the days of a visit to the local bank manager are long gone. New players are entering the market regularly with new, flexible and exciting channels of borrowing and lending. Advances in Fintech, innovative methods of working and access to information are just some of the drivers behind this growth but ultimately, all of the players in the this space are coming to the market for the same ends - to provide SMEs with the best type of funding to grow their business.

Whether you are a business seeking to understand how new financing can help, consolidate your market, grown into a new geography, gain advice on expanding and financing a new team or just understand more about this market, The Business Funding Show is opening its doors to provide you with the help you need to take the next step to grow your business.

We’ve also outlined the 10 most common forms of funding below as a helpful starter guide for those looking to take the next step on their business journey:

Business Angels. Business Angels are wealthy entrepreneurs that are actively seeking people with dynamic business ideas to invest in. They’ll want something in return, which is normally a share of the business. However, you’ll not only benefit from their investment, you’ll also get to reap the rewards of their experience.

Venture Capital. If you need serious investment (£500k plus) then venture capital financing is the answer. This option is best suited for those who are primed for rapid growth, and just need a cash-injection to get moving. However, don’t expect to get a huge lump sum upfront. Generally speaking, VC funding comes in instalments to help manage growth effectively. You can also expect to give away a substantial portion of the business – but in return, you’ll get significant help to scale-up with impact.

Crowdfunding. Crowdfunding is a recent phenomenon, which involves asking people to invest specified amounts of money in your business, usually in return for something. Do it well, and you’ll swiftly raise the money you need without spending too much in the process. However, it’s not as easy as it looks, and in today’s competitive market, you’ll need to make sure your business idea stands out.

Peer to peer lending. Most Peer to peer lenders are private individuals investing in a range of different business ideas. They run via sites with some operating on an auction basis, which means, after completing an initial assessment, you can select a lender, based on a rate of interest and loan period. However, you’ll need a good financial history, and if you’re a new company, you might be considered ‘higher risk’, which will mean higher interest rates.

Asset financing. Secure your loan against your capital assets and gain money quickly for your business. The downside is clear here. Fail to pay it back in the specified time, and your assets are seized by way of payment. However, if you’re confident that you can fulfil the terms of the loan, it’s a good way to get your mitts on the money you need.

Invoice finance. You can raise cash against future invoice payments from your customers. This comes in handy if you need to cough-up cash for the suppliers before being paid by your clients. However, this type of financing isn’t often available to those who sell direct to the general public. Likewise, if your clients don’t pay – you’ll have to shoulder the costs, plus interest.

Cash advance. The business equivalent of payday lending. This is is a high-risk option, and only suitable if you need the money fast, and know you can pay it back quickly. Otherwise, be warned, interest rates are eye-wateringly high. However, it’s one of the quickest ways to get your hands on money for your company.

Pension-led funding. If the banks have turned you down, but you have a sizeable pension fund, this is a good way of getting your hands on a commercial loan. It’s a simple concept – you secure your loan against your pension. However, the loan can’t exceed 50 per cent of your total pension fund, which in some cases, may not be enough for what you need

Business grants. Fancy getting some money without having to pay it back? That’s essentially what a business grant is – and they tend to be allocated by governmental bodies, public institutions and other similar organisations. Don’t make the mistake of thinking ‘free’ equals ‘easy’. On the contrary. Every business wants to get their hands on these coveted grants, so competition is fierce and you’ll have to work hard to ensure your pitch stands out.

Accelerators and Incubators. Both Accelerators and Incubators are there to give you the benefit of their expertise, support and mentorship – and they’ll also be able to point you in the right direction for financial support within their impressive network of investors. You’ll probably need to pay a fee or give them some equity to secure their help, but it may work out advantageous in the long-run.

By Arina Osiannaya, Director of the Business Funding Show