Funding Options for Small Businesses

Lots of people have a dream to be an entrepreneur but these days fulfilling of dream to be an entrepreneur is not easy anymore because of difficulty in finding the funds. There was a time when someone had a small business idea or an operational small business just had to go to bank with the idea to get funding but now due to complex economic system and tough economic times finding funds for business has become very difficult as banks are reluctant to loan funds small businesses. Due to the fact small businesses are looking for new sources to get funds.

Sources of Funding for small businesses:

• Loans:

Loans are the most common and widely used source of funds for businesses. Usually loans are backed by some kind of suitable security to give satisfaction to the lender. The common sources of getting a loan are Bank Loans, Credit Cards, Bank overdrafts, mortgages. these sources can be useful if used properly.

• Finance backed by some Assets:

Due to the tougher economic times loans backed by assets are more prevalent. Usually these loans are given by banks and by lending societies in return of some assets security given by businesses as guarantee. Assets can be machinery, sale orders, sales invoices, real estate. These loans are not a good source of funds for small businesses and startups as usually they cannot provide any assets as guarantee.

• Grants from Government or Local City Council:

Grants are usually the cheapest source of funding. There are a large amount of business grants available which are from Government, Local City Council, local regional society and the EU. Grants are established to promote the entrepreneurship and small businesses preferably for some particular sectors like Research & Development, environmental schemes, and to generate employment, and because of that it is not easy to get grants and accompanied by large and complicated application procedure. So it is wise to check the eligibility criteria before applying for business grants.

• Angel Funding:

Angel Funding provides the provide much needed funds to small businesses quickly and at cheaper rates of interest compared to other sources of funding. Angel Funding is the funds by individuals and retired entrepreneurs who want to invest their saving or extra cash for better return than traditional investment options or want to support the community by helping small businesses. In last couple of years angel funding has emerged as the most prefered choice of businesses for generating funds because of the benefits associated with it. As per a source more than £10 million worth of angel investment is available in UK and only 1% of the total funds request are received by the angel investors. There are lots of platforms available on internet for the business and investors and to look for Angel Funding and help each other.

Author’s Bio: The article is written by Anurag Agarwal who is a blogging enthusiast and writes about business financial matter.