Funding routes to help your SME grow
Once you’ve started your SME, it’s time to begin helping it grow and many times that involves additional financing to fund equipment purchases, raw material costs, or simply boosting day-to-day productivity. The initial startup process can be different from the growing process and this article will go over the various ways to help your SME grow through various funding routes, with the main difference being these funds are to help grow your business.
The first lending route is through a traditional bank loan. If your SME has been around for a little while, you will likely find success taking this route to obtain financing. These lenders are going to require business information and financials.
Utilizing a bank loan can help you obtain a lower interest rate, and have less of an impact on your bottom lines. This route will likely prove the most cost-effective because of interest rates being lower, but it may take you more time. When presenting to your business lender, ensure you are capturing the growth of your business and how these funds will accent and propel the growth because a lender wants to invest in a company that will return their investment and then some.
Next way to help grow your SME is through crowdfunding, which is simply reaching out to the public to pledge funds and in return they likely receive a special item or advance opportunity to your services.
This type of funding not only helps your business grow through upfront cash flows but also can provide positive light to your brand and image. If you have the latest and greatest of something within a market, by crowdfunding you can allow your loyal customer base access to items that otherwise would not be obtainable, in turn, they give you cash on the front end. One of the risks through is your brand fails to come through on the promise and hurts the trust between you and your company.
With advancements in financial technology, peer-to-peer or P2P for short has become a viable way for SME’s to obtain financing. This is simply when one individual lends to another individual, similar to a traditional loan. There are many platforms on the market including Lending Club, which matches lenders and borrows. Utilizing this method can be efficient because depending on your creditworthiness and amount to be borrowed; the process can be done quickly.
However, the main drawback is the higher interest rates but despite that, it can be an effective way to obtain financing. Also, this is done on the personal level so if you have average credit, you will likely still find lenders to fulfill your borrowing request.
Other financing routes to help grow your business include bringing on an investor who not only brings financing but real market experience. The other is to utilize a business credit card to purchase the smaller items that assist with the day-to-day operations of your business.
There are several different ways to grow your business through financing and knowing what fits your needs best is important. Traditional lending may work best for you but for some, alternative options such as peer-to-peer may be exactly they need. Growing your business can be challenging but finding the right financing options shouldn’t. Take the time to research these various options and find what fits well. Funding your business is critical and doing so in a healthy manner will bring your business an asset that is welcomed.