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7 powerful ways to raise investment for your growing business

Growing your small business can be an exciting time, but securing funding to support that growth isn’t always easy. 

With many different options available, and not all of them suitable for every business, it can be an overwhelming process, even for the most seasoned business owner. 

If you think your business could benefit from some funding or investment but aren’t sure what that might look like, understanding your options is the first step. Read on to discover seven types of funding you could apply for that could help you to achieve your business goals. 

1. Government grants and loans

There is a huge range of different types of funding available to small businesses and startups through the government. Some of these programmes are geared towards supporting businesses in certain sectors, others might reward you for sustainable practices, while some might offer support in hiring team members to improve employment rates in your area. 

Competition can be fierce, so make sure you only apply if you fit the eligibility criteria. Take the time to craft your application to ensure you’ve answered all the questions thoroughly to stand the best chance of success. Depending on the scheme and your circumstances, successful businesses could be eligible for up to £150,000 in grants or up to £1.2 million in loans. 

You can find an extensive list of the loans, grants, and other sources of funding available on the government website that could help your business to grow. Filter the results by your sector, business size, and the region you’re based in to find the programmes that are most suitable for you. 

2. Bank loans

Applying for a business loan from a bank is a popular way to secure funding. Business loans are available for small amounts of £1,000 all the way up to several million. 

Of course, being a loan, the money you borrow will need to be paid back, so it’s important to make sure the interest rate you’re offered is manageable for your business. 

You can usually choose the term of the repayments, with options ranging from a few months up to a decade or more. A shorter term will usually mean that you pay less in interest overall, but you may have higher monthly premiums, so there are a few things to consider before making your choice. 

You can choose between a secured or unsecured loan. The former means that you would need to use a business asset as security for the loan, so, in the event that you’re unable to pay back what you owe, the bank can sell these items to recover their costs. 

An unsecured loan means you can borrow money without using any of your assets as security, but this might mean you pay a higher rate of interest. 

Taking out a business loan means that you can use the money for virtually anything you need, whether that’s helping with cash flow, buying new machinery or equipment, or investing in business growth. You also avoid the need to give away any equity in your business, so if that’s important to you, a business loan might be a helpful source of funding. 

3. Crowdfunding

Crowdfunding has grown in popularity in recent years as it can be used by businesses, charities, and private individuals to raise funds for a host of different causes. 

Crowdfunding works by creating a profile on a crowdfunding site – examples that you may have heard of include GoFundMe and Patreon – and asking private individuals to pledge cash to help you reach a fundraising target. In your profile, you’d explain your business mission and anything else that will help investors understand why they should support you. 

Fundraisers will usually offer some form of compensation to those who help them towards their target. If you’re raising cash for a business, you might offer a free sample of your product or even a small amount of equity in your company. While this might be a downside to the method, it does mean that the money you receive doesn’t need to be repaid. 

Crowdfunding can be a helpful way to raise funds, but bear in mind that there is no guarantee you’d meet the target you’ve set for yourself. It’s also important to make sure you use an accredited crowdfunding site. You can view a list of options on the UK Crowdfunding Association website. 

4. Peer-to-peer lending

The term “peer-to-peer lending” is often used interchangeably with crowdfunding, but there are some important differences between the two. Most notably, peer-to-peer lending involves a large group of private individuals lending money to your business that you will need to pay back, whereas investment received through crowdfunding doesn’t usually have to be repaid. 

These types of loans are usually facilitated by a peer-to-peer lending company using an online platform. As the business owner, you apply to the company for a loan, but the money you receive is borrowed from a group of private investors. 

The benefit of peer-to-peer lending is that you and the investors can usually secure a more favourable rate than you might have been able to through a high-street bank. 

Most peer-to-peer loans are unsecured, which means your business accounts and forecasts will be carefully checked before any money is offered. Despite this, depending on your proposition, you could be offered a very competitive rate.

5. Angel investors

Angel investors offer a very different type of funding than a loan, as they usually offer investment (or “seed funding”) of up to £1 million in return for equity in your business. It’s become a familiar concept thanks to shows like Dragons’ Den.

An angel investor is a high net worth individual – normally someone who has run a successful business in the past – who invests in startups that show potential for significant growth. They usually become involved in the running of the business, offering advice and guidance using their own specialist knowledge about the sector that you work in. 

If you decide to take this route, it’s important to note that the investor is putting their own money into your venture. This means your books must be watertight and your business proposition must be robust. You may need to accept some conditions about how you can use the investment, too.

Given that the investor will tend to work alongside you in some capacity, you will also need to make sure you are aligned in your ideas about the future of the business. 

It can take time to find the right person who is willing to offer you the funding you need and who is a suitable mentor for you – choosing the wrong person can cause significant problems in the future, so it’s vital to take your time and make the right choice for your business. 

6. Venture capital firms

Seeking investment from a venture capital firm is a bit of a step up from angel investment; it carries some similarities to peer-to-peer lending.

Essentially, high net worth individuals or companies invest their money into a fund, which is managed by the venture capital firm. The firm invests in startups that show the potential for significant growth in a particular sector, with the aim of increasing their value and providing a return on investment for the investors. 

Just like an angel investor, venture capital investors in your business may offer guidance and mentoring to help your business to succeed, but this can be a double-edged sword. Depending on how much they have invested, the stakeholder could have significant sway in how your business is run, even if you don’t agree with their suggestions. 

So, it’s important that you take time to consider whether you are willing to accept the conditions that a potential venture capital investor might place on your business before applying.  

7. Lend to your business from your SSAS

If you have a small self-administered scheme (SSAS) pension, it may be possible to offer a “loanback” to your business, provided you have sufficient funds. 

A loanback can be a helpful way to secure funding for your business that is also beneficial to your pension scheme. There are some strict eligibility criteria to comply with if you decide to go down this route, though, including: 

  • You can only loan a maximum of 50% of the value of the pension.
  • The interest rate offered must be a commercial rate and at least 1% above the average base rate of the six biggest high-street lenders.
  • You must secure the loan against an asset.
  • The loan must be repaid in equal parts capital and interest. 
  • The term of the loan cannot be more than five years. 

You can read more about how you can use your SSAS to loan money to your own business as well as the many other benefits of the scheme on our website. 

A financial planner could help you to decide how best to raise funds for your business

As you can see, securing funding for your business can be a complex process. With your future business growth at stake, it’s crucial that you choose the right fundraising process for you. This is where a financial planner can be an invaluable guide. 

A lifestyle financial planner can help you to take a close look at your business to discover exactly what type of funding would be most appropriate. 

Get in touch

If you’d like to learn more about how we can support you in raising funds for your business, we’d love to speak to you. Say hello to us [email protected], call us 0161 541 2826 or submit a contact form on our website. 

Please note

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future results. 

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates and tax legislation may change in subsequent Finance Acts.  

This article is no substitute for financial advice and should not be treated as such. To determine the best course of action for your individual circumstances, please contact us.