The UK’s economic landscape is rocky at the present moment, as businesses and households across the nation brace for a difficult autumn. Energy prices are set to skyrocket further, affecting small businesses disproportionately; meanwhile, reduced spending power has seen the real-terms cost of supply increase dramatically.
But a negative economic outlook does not necessarily make for a hostile atmosphere in which to start or grow a business. Indeed, growing a business can be necessary for futureproofing against further economic shock. But what are the routes to financing such growth for a small and emerging business?
The first route to financing business growth is also one of the most common: the business loan. By approaching a bank or lending institution, your business can secure funding for a costed expansion or expense. The best deals for such loans can be found in secured loans, wherein the amount you are borrowing is secured against existing business assets.
Unsecured loans are also available, but these can often incur high rates of interest relative to the market average. Business loans in general are a conventional route to securing funding, and a sure way to reinforce your business’ financial situation – especially at a time when cashflow is of particular importance.
Peer-to-peer financing, or P2P financing, describes a form of borrowing that occurs between enterprises – as opposed to between an enterprise and a lending institution such as a bank or building society. P2P lending can occur between two businesses, but has also been popularised through alternative lending services that match investor pools with borrowers.
P2P lending enables swift access to sums of money for growth, but can often come with caveats – especially in the form of increased rates of interest. The high interest offsets the risk of default for lenders participating in P2P programmes.
For the start-up business seeking major growth without the business history or assets to secure a large enough loan, there are other opportunities that avoid the traditional lender-borrower relationship. Venture capital is a particularly powerful route to funding expansion, where investment banks, larger businesses or high net-worth individuals trade funding for equity in the business.
Lastly, new or emerging businesses can use the power of their reach to their advantage, and tap into the resources of their wider network for growth and development. Crowdfunding has become a key route to financing for many businesses, whether B2C businesses having customers front the cost of product manufacture or having individuals crowd-invest in a business’ future.