Sme’s And The Alternate Types Of Funding

Types Of Funding

If you’re a small or medium-sized enterprise (SME) and you’re in need of additional funding, it could be difficult to know where to turn.

While with personal finance you may turn to friends and family or even a payday loan direct lender when you need a little bit of a cash injection but when it comes to businesses it can be a little more difficult to get the help that you need.

Here, we’re taking a look at some of the alternate types of funding that you can turn to for your SME.

»Crowd Funding

Crowd Funding

Crowd funding is a popular alternative type of business funding and is particularly popular with start-ups. Generally, this is more used for project work however that doesn’t mean that it’s impossible to use for general business operations.

Crowd funding works by other individuals chipping into the business by providing donations or investments and the money sits in a ‘pool’ until the target is reached. If your business is particularly active on social media or online, this could be a good option for you – and can often be quite a quick way to raise funds if the idea catches on.

However, it is important to note that others could copy your idea if it’s not patented or otherwise protected, and you will need to return the funds to the contributors if the target is not reached.

»Government Grants

If your project or business is of particular interest to the government or falls into specific categories, you may be eligible for a government grant. Other providers can also provide certain types of business grants which is essentially free funds to invest in your business.

The process of obtaining these grants is often lengthy and admin-heavy, however, if successful you do not have the pay the funds back (in most cases). Nevertheless, the business idea or project will need to be specifically tailored to the grant which could provide some restrictions in order to be eligible.

»Investment Finance

Investment Finance

Investment finance allows you to share a portion of the business as shares to investors who will then take a portion of the profit (or losses) that the business makes afterward. Dragons Den is a commercialized version of investment finance, however, there are many examples of investment finance across the world for successful businesses.

There are some restrictions when it comes to this, however, when you bring in outside investment, they may have their own ideas of how they want the business or project to run or the direction of it which means you will be giving up some form of control.

However, they can provide expertise in a particular area which can be invaluable to SME’s looking to grow in the sector that their investors specialize in.

With so many types of funding available for SME’s, conducting comparisons of all of the different options from bank loans through to some of the alternatives listed above can help to boost your SME and provide further financial assistance for the future.

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