Friday 24th Jan 2020
Small businesses often find that they need financial help to either see them through their early years, or give them the boost they need to grow. But there are a lot of different products on the market, and many different providers too. It can be tricky working out which financial products are available for smaller businesses to make use of, and what benefit each one brings. With this in mind, we’re going to look at the main options.
Finance for small business usually means looking at loans. They’re especially useful for businesses that need to fund something specific such as expansion, the purchase of new equipment or stock. It’s always important to make a business case for anything loan that you might want to take out. You should have a clear purpose for the money, and be able to demonstrate why the cost of the loan is outweighed by the benefits of it. Luckily, there’s a huge amount of choice in the market for small businesses looking for a loan, which means there’s opportunity for you to find the best terms and rates.
Overdrafts are a very popular financial product for businesses of all sizes, but are particularly valued by smaller businesses. They’re more flexible than a loan, which makes them useful for being in reserve. Businesses can dip in and out whenever needed, which can be helpful in times of difficult business, or to mitigate the unexpected. It’s worth being aware however that overdrafts can be more expensive than loans, so they’re not always the best choice for specific purchases that a business case can be made for. They can also be useful for cash flow, which is important when it comes to SME business finance.
Another financial product that can help with cash flow is invoice finance. This is quite different from a loan or overdraft, and is where your finance provider pays into your account whenever you raise an invoice. There are costs associated with it, but this can potentially be a useful way of preventing late payments from causing you trouble. Again, it’s important to make a business case that weighs up the costs versus having the money in your account exactly when you need it.
The modern marketplace also has plentiful solutions that have only become available because of the way the internet can bring businesses and investors together. Crowdfunding has become a popular way of getting new products developed for example. If your business has an idea, but needs the funding to go through with it, crowdfunding can help connect you to people that also back the idea, and want to share the benefits of it being produced. Similarly, angel investors can help take your business to the next level, and online services can be the broker.