If you are seeking financing for your business, you have a wider range of options than you might realise, each with its own advantages and disadvantages. Which you choose will depend on your specific needs and circumstances.
Medium and Long-Term Business Loans
Traditionally, the bank is one of the first places to try to secure funding, but loans can be difficult to obtain. Other lenders are available, many online, though you will need to do due diligence. Medium-term loans are normally paid back over five years, while long-term loans may be spread over an extended period, but often need to be secured with assets.
Venture Capital
Generally considered to be a high-risk, high-reward option, venture capital is usually offered to newer, smaller businesses with a high potential for growth, often in a niche industry. Investors can offer direct cash, but will take an equity stake and often involve themselves directly in the running of the business. This means partially surrendering control.
Private Equity
Private equity works in a similar manner to venture capital funding, in that you have to offer up a stake in your company, but it can also work for more established businesses. You need to be very careful in drawing up an official agreement and should seek legal advice first.
Commercial Mortgages
Like a residential mortgage, commercial mortgages often involve high deposits but low interest rates. Consult with your bank or a reputable broker. A directors personal guarantee may be required to secure the mortgage, so consult with a legal advisor such as https://www.parachutelaw.co.uk/director-guarantee.
Small Business Grants
Non-repayable grants can be offered by governments and other institutions to help with funding, but they generally have strict eligibility criteria. Applications can be time-consuming, and there will often be restrictions on how the money can be spent. You may be able to find further government advice and support for your business.
Crowdfunding
Increasingly popular as an alternative to traditional funding methods, crowdfunding involves many small donations from large numbers of people. There is often a tiered reward scheme offering merchandise or something similar, depending on the level of the donation. You will need a strong marketing campaign and a good understanding of your likely costs before you start.
This is just a small selection of traditional and modern financing options. You need to consider all relevant factors carefully before choosing one that suits your business plan.