Finance for Small Businesses

I see that the Federation of Small Businesses has today called on the government to support non-bank finance for small businesses. It’s certainly true that since 2008 bank finance for small businesses has been in short supply, and whilst government support would be welcome, if somewhat belated, the fact is that over the past few years there are plenty of organisations that have moved to fill the funding vacuum left by the banks.

There are a number of online peer-to-peer lending sites catering for both small business loans (e.g. The Funding Circle) and personal loans (e.g. Zopa).

Whilst the B2B sites offer loans at fairly competitive rates many owners will be looking for more substantial finance for small businesses than these sites can offer. Fortunately companies are finding alternative and flexible ways of meeting this demand, and any competent business finance broker will be able find a suitable provider to meet a particular business need.

And there are plenty of business angels and venture capitalists looking for small businesses with high growth potential that they can invest in.

When considering what finance is needed business owners should also consider the availability of government grants, and tax incentives such as those available for research and development, the criteria for which are far wider than many business people realise.

Whilst not seeking to defend the performance of banks in recent years I have to say that many owners don’t put nearly enough effort into justifying their need for business finance. I’ve seen plenty of business plans that barely merit a second glance, much less serious consideration. Owners must understand that any organisation or individual with money to invest needs to see a coherent plan that sets out how the business will repay, with interest, the investment made.

Some find The Dragons Den good entertainment, but it bears little resemblance to the reality of finding finance for small businesses in the real world. Most owners don’t even get to the stage of having their requests looked at, much less meet an investor, because they’ve simply not written a good enough business case.

Well written business plans can attract investment, and fortunately there are experts who can write the plan for you whilst you focus on running your business.