By Sharon Argov, Co-Founder, Fundbird
With 73% of small and medium-sized enterprise (SME) employers aiming to grow their business over the next two to three years, the demand for funding has never been higher. The daunting task of finding funding can be incredibly stressful, and many SMEs are left in fear for their business after a rejection from the bank. Being refused funding can be discouraging to the extent that 37% of businesses give up their search for finance and cancel their spending plans after their first rejection.
However, the opportunity for funding does not stop at the banks. Today, with the increasing number of alternative funding platforms, from peer-to-peer lending to crowdfunding, small business owners have the opportunity to flourish even without funding from the bank.
The next task? Finding the right funding for your business. Alternative finance has become a competitive market with a widespread variety of lending platforms, including MarketInvoice, Funding Circle and Start Up Loans, so don’t rush into anything you’ll regret. Finding the appropriate funding may seem a lengthy and confusing process, but there are ways to ease the journey:
1. Plan ahead
Make sure you’ve got a solid business plan and be meticulous about your numbers – estimates and approximations simply won’t cut it. An accurate plan will highlight exactly how much money you need and where the money needs to go. There are over a hundred alternative funding platforms, some of which specialise in particularly niche areas of business, so a detailed plan will point you in the right direction from the very outset. It is worth spending a good amount of time perfecting your business plan, specifically verifying your facts and figures in order to ensure that you don’t fall at the first hurdle.
2. Organise your financial documents
When approaching alternative funding platforms, having your financial documents organised and at the ready will ease the process and you’ll receive your funding much sooner. Whilst these lending platforms are not as restrictive as the banks, it is still important that you provide accurate information such as bank statements, VAT returns and company accounts so that they can help you in the most effective way. Try to have important figures at your fingertips: What does your business turn over annually? What is your business’ credit status? How many sales do you process with credit/debit cards? It’s a good idea to keep track of your company’s data and work out a system for organising important financial documents. It may seem a dull task, but it will be worth it and funding platforms will take you seriously.
3. Be realistic
It’s vital to remain realistic about your financial abilities when exploring your funding options. Committing to an oversized loan will only cause unnecessary stress when it comes to paying it off at the end of each month. A loan should serve as a benefit not a burden, so examine your figures to work out the amount of funding that you can comfortably pay back each month. Precise planning should provide a realistic indication of how much money you need to help your business grow without causing financial strain.
4. Compare/weigh up your options
Don’t rush! The variety of funding platforms in the industry is great news for SMEs but the immense quantity of them can also be overwhelming. There are so many platforms to choose from so make sure you take time to weigh up your options and don’t rush into the first lender you come across. It has become a fiercely competitive market so check through your options with an intermediary or by contacting the lenders directly for reassurance of your decision. Comparison sites are excellent for helping you make an informed decision so make sure you utilise these available tools.
With the growing popularity of alternative finance, it is an exciting time for small business owners. The wealth of available lending platforms means there is no reason why you shouldn’t be able to find the funding fit for your business. Last year £1.75 billion was lent to SMEs by alternative finance platforms, helping small businesses find their feet all over the UK. By following these simple steps, you can join the growing collection of businesses that are flourishing with the help of alternative finance.