Funding options to grow your business: A simple guide
If you’re a business owner looking to expand but feeling overwhelmed by the various financing options, you’re not alone. There are many ways to fund your growth, each with its own advantages, requirements, and considerations. Here’s an overview to help you choose the right type of finance for your business.
1. Bank loans and overdrafts
Traditional bank loans and overdrafts are common choices for established businesses with a strong credit history. They offer predictable repayment schedules, and if you have an existing banking relationship, it might be easier to secure funding. However, be prepared to provide collateral, as banks often require security for loans.
2. Alternative debt finance
If traditional loans aren’t available or suitable, alternative lenders, including FinTech companies, offer another route. These lenders provide quick, accessible loans, often without the need for physical collateral. Keep in mind that they may charge higher interest rates, and your business usually needs at least two years of trading history.
3. Community Development Finance Institutions (CDFIs)
CDFIs offer loans specifically to small businesses and social enterprises that may not qualify for traditional bank loans. They take a detailed look at your business to understand your potential and offer loans of up to £250,000. While interest rates may be higher, CDFIs can be a good fit if you’re looking for a supportive lender that values social impact.
4. Revolving credit
Revolving credit provides a flexible way to access funds up to a certain limit, allowing you to borrow, repay, and borrow again. This is ideal for managing cash flow fluctuations, as you can draw down only what you need, when you need it. Unlike credit cards, revolving credit doesn’t come with a payment card; funds are transferred to your business account.
5. Asset finance
Asset finance helps you acquire equipment or machinery without paying the full cost upfront. Options like hire-purchase and leasing allow you to use the asset while making regular payments, with the borrowing secured against the asset. Asset finance is ideal for businesses that need specific equipment but want to keep their cash flow steady.
6. Invoice financing
Invoice financing is designed to bridge the gap between issuing an invoice and receiving payment from your customers. With invoice factoring, the finance provider manages collections from your customers, while with invoice discounting, you retain control of customer relationships. Both options improve cash flow by providing quick access to funds tied up in unpaid invoices.
7. Crowdfunding
Crowdfunding leverages the power of the crowd to raise funds. There are three types:
Donation-based crowdfunding – Supporters donate without expecting anything in return.
Reward-based crowdfunding – Backers receive a reward, such as a product sample.
Equity crowdfunding – Investors receive shares in your business.
Crowdfunding is best suited for businesses that can offer compelling stories, unique products, or a strong community appeal.
8. Business angels and venture capital
Angel investors and venture capitalists (VCs) provide funding in exchange for equity in your business. They are often highly engaged, bringing expertise and connections alongside their investment. However, they expect significant returns and a clear exit strategy, so this route is ideal if you have big growth ambitions and can scale quickly.
9. Grants
Grants are a fantastic option if you can secure them since they don’t need to be repaid. However, they are often competitive, with strict application processes and specific criteria. Grants are generally geared toward innovation, expansion, or social impact. They can require significant documentation, so be prepared to demonstrate a clear benefit or “step change” to your business operations.
Choosing the right option for your business
When selecting a financing option, consider your business’s current needs, growth goals, and cash flow situation. Think about:
Repayment terms and interest rates – Will the monthly payments work with your cash flow?
Collateral – Are you willing to provide security for a loan?
Equity considerations – If giving up some ownership is acceptable, equity financing may be worth it.
Flexibility – Do you need funds immediately, or can you wait for a competitive grant?
Financing can feel complex, but knowing your options can empower you to make the best choice. With the right funding, your business can achieve its growth ambitions and take on new opportunities.
How to access funding
- Talk to a BGWM Adviser. Their recommendations will be tailored and impartial. They can help you make the right choice, and signpost you to any grants or programmes you are eligible for.
- Use our free finance finder tool to search for suitable finance and funding options, with no credit check or obligation. Click here to learn more about how it works.
- Join our fully funded Investment Readiness programme to get yourself and your business where you need to be for success in achieving financing.
