The Albion Growth Report – a study of 1,000 SMEs which aims to explore the factors that help businesses grow and the issues that hold them back – has found that the popularity of bank loans and business overdrafts is declining.
Instead, business owners appear to be turning to equity finance and other long-term financing options in place of the traditional bank sources.
One of the biggest challenges start-ups and fledgling businesses face is securing the funding they need to realise their potential.
A majority of business owners feel that finding finance is difficult in the current climate, and in particular, that banks are reluctant to provide business loans at competitive rates.
So to help you maximise your chances of getting that all-important business loan, we asked Rishi Khosla, the CEO and co-founder of OakNorth Bank – a bank that specialises in lending to entrepreneurs and growth businesses – to share his valuable insight and personal experiences with ByteStart readers;
If you need more finance to grow your business, there are a number of options which you might wish to consider. You could turn to your own personal savings, ask family members for help, get a bank loan, issue shares, or speak to some business angels or venture capitalists.
Or you could consider peer-to-peer (P2P) lending.
P2P lending is fast becoming the norm for businesses needing finance to get an idea off the ground or raise the capital necessary to expand and take projects to the next level.
But whilst it’s become a more common financial avenue for SMEs to pursue, it’s still not as well-known as it could be. According to a 2014 Nesta Report, only 44% of UK small businesses have heard of P2P lending.
So what exactly is peer-to-peer lending and how can small and growing businesses use it to finance growth?
When people talk about ‘gearing’ in a business, they are usually referring to one of two types;
- Financial gearing
- Operational gearing
Here’s a guide to what gearing is, and how you can use it to increase the returns your business makes;
Business owners that are exploring some of the newer business funding options, commonly referred to as ‘Alternative Finance’, can sometimes struggle to distinguish between ‘crowdlending’ and ‘crowdfunding’, not least because they sound remarkably similar.
Both describe ways of raising business finance, but there are huge differences between the two which need to be clearly understood to avoid any tears at a later stage.
So how do crowdlending and crowdfunding differ, and what opportunities do they offer start-ups and small businesses? (more…)
Looking for an investor to help fund your business? You’d better make sure they’re an angel, not a dragon!
Most businesses require outside investment at some point in their development. Whether you are a new business needing a cash injection to get started, or an established company looking to launch a new product or move into new markets, attracting investment will be essential to your venture’s success.
While “entrepreneur” may occasionally be a euphemism for “out of work”, there are more and more individuals working in earnest to start a business of their own. Indeed, statistics show no fewer than 400 million such individuals globally, with over 2 million in the UK and 20 million in the US.
Sadly, many of these ventures will never get off the ground at all. Of those that do, the majority will fail. Of those who submit business plans to venture capital investors, less than one percent will get the funding they seek.
Those elite few who do raise finance have to give away large portions of their company and control in return. Worse still, many business founders who do receive venture capital money get fired within a year of the investment.
Despite the challenge of raising money, and the serious potential downsides, there is a widespread notion that if you are an entrepreneur looking to build a successful, growing business, you need to write a business plan and raise a few million pounds. But this vision is essentially wrong.
To raise money to grow your business, you have to convince likely lenders that your idea is profitable, or at least has the potential to be.
Here, we take a look at two the two key elements that should drive your search for funding;
- The different types of finance available
- What lenders and investors look for in businesses
This guide helps you to understand more about the main types of business finance available, and also highlights what investors and lenders look for in a business before they lend it money.
So you want to sell your business? The place where you’ve spent more time than with your family; invested money which you’ve sometimes had to borrow in order to expand or buy new equipment; given your heart and torn out your guts; worked anywhere from 60 – 80 hours a week, maybe more; tackled a recession and seen a chink of light at the other end.
Now think of decorating a room. Any professional will tell you it’s 80% preparation and 20% finish. I wouldn’t go quite that far, but the planning is all important when it comes to selling. (more…)
Angel investors can be a lifesaver for a small enterprise – not only can they supply capital investment, but they often have years of valuable experience to offer a fledgling business.
As viewers of Dragons’ Den will know, securing angel investment is no easy task. Although much of the BBC show is put on for our entertainment, many of the business owners who appear on the show make the same fundamental mistakes.
Here are five things you must consider if you are seeking investment from a business angel; (more…)
The Angel CoFund, which provides investment capital for businesses with the potential for rapid growth, can now be tapped by companies from all over the UK.
Previously, only high-growth businesses in specific geographical areas of the UK were eligible for funding through the CoFund. However, a £50 million finance boost from the government’s Business Bank initiative sees the fund being opened to businesses from all parts of the UK.
Although it may not reflect ‘real life’, the BBC’s Dragons’ Den programme has done a good job in highlighting the role that angel investors play in the business world.
It may seem counter-intuitive, but the ongoing economic downturn has actually resulted in an increase in business angel activity. As the returns from more traditional means of investing dwindles, some investors are more prepared to invest in riskier propositions rather than watching their capital increase by 2% per annum elsewhere. (more…)
The Government launched the EFG scheme to encourage lenders to provide further funding to smaller businesses following the credit crisis. In this article, we look at the how the scheme operates in practice, and how small firms can benefit.
Raising business finance is difficult at the best of times but in today’s age of austerity banks, business angels and governments are tightening their belts, cutting off the supply of cash which is leaving start-ups and growing businesses who need seed finance thirsty for money. As a result venture capital is being democratised.
When you are starting a new business you have a million and one things to think about. As a new business owner, many of the issues you will need to tackle, will be completely unfamiliar to you.
With so much to do, you will need to learn quickly. If the financial side of the business isn’t your strong point, here are 10 tips from ByteStart to help you stay on top of your business finance.
If you’ve ever watched an episode of Dragons’ Den – and find me anyone in business who hasn’t watched at least one episode – you’ve seen some venture capitalists in action.
At ByteStart, we have come across hundreds of would-be entrepreneurs over the past decade. We have also had the pleasure of meeting plenty of angel investors and industry insiders.
If you have a fledgling business, or an idea that you think you can turn in to a viable business, you might want a business angel to help fund it. But before you charge ahead, here are 9 tips on what you need to do to impress business angels and potential investors.
Launched in 1995, shortly after the introduction of the Enterprise Investment Scheme (EIS), Venture Capital Trusts allow individuals to invest in a range of small unquoted companies and spread their risk. Income tax and capital gains tax (CGT) reliefs are available to investors in VCTs.
Created in 1994, the Enterprise Investment Scheme (EIS) provides investors with a series of attractive reliefs in return for investing in unquoted companies which may carry a higher degree of risk. How do companies and potential investors qualify to take part in the Scheme?
Stock market quoted companies are valued according to widely accepted formulas, however there are no ‘standard’ ways to value small or micro businesses. This can cause real difficulties when it comes to buying and selling a small business, as the buyer and seller often have very different opinions on what the business is worth.
With this in mind, we look at some of the valuation issues that may arise if you are planning to sell your business, and how you can overcome them.
Most small businesses will, at some stage, seek funding or investment – for growth, starting up, or to see them through a transitional period (or a downturn). In this article, we look at the main sources of funding that are available.
Many small businesses use credit cards to manage expenses. With such a vast array of offerings in the marketplace, what should you look out for when choosing a business credit card supplier?
Funding is essential for growth, but how do you ensure that you can secure it? Here Kim Farrell, Corporate Finance Partner at Essex-based chartered accountants CBHC LLP, offers some helpful advice.
The availability of bank loans for businesses is a hot topic at all stages of the economic cycle. During downturns, lending can become tightened, while boom times see some businesses take on huge debts in their quest for rapid growth.
While it might be highly entertaining television and gets people talking about business, Dragons’ Den does annoy us here at Bytestart!
When you’re just starting in business for the first time, getting your hands on the finance you need to get established and begin to grow can be a difficult task.
One of the least exciting things about starting your own business is getting the finances sorted out (unless you’re an accountant of course).
But it is one of the most important tasks. It doesn’t matter how good you are at what you do – if the money runs out, your business is dead.
The best business idea is no good if you don’t have the finance to make it a reality. And if you need to get that money from elsewhere, business grants can be a great option.
However, you’ll need to convince the provider that you’re worth the investment – so here are ten top tips for business grants;
With about 850 business grants available in the UK, either from national organisations or via the European Union’s various forms of business support, and a further 3,000 or more local authority grants, enterprise funding sources, economic development providers and other regional bodies, companies have plenty of choice when it comes to seeking business grants.
Start-up businesses can increase their chances of funding by taking early steps to structure their business to take advantage of the tax incentives available to potential investors, says gateway2investment (g2i).
When most people talk about starting a business, they mean setting up a company from scratch.
In many respects, that’s one of the hardest ways to get going in business, as you have to do everything for the first time and make some pretty hard decisions along the way.
With credit hard to find over the past few years, people thinking of setting up a business have had to come up with creative ways to fund their ideas. Here are some tips from the Bytestart team: