A Quick List of Alternative Funding Options for Small Businesses in the UK

An estimated 5.5 million start-ups attempt to tackle the British business world each year but with a failure rate of 60%, many aspects prove too much for most start-ups to triumph over. One of the most significant is funds – a typical adversary for many small businesses looking to expand and thrive.

While the most obvious way of sourcing funding is by approaching traditional lending sources, such as lenders and high-street banks, they are not always the easiest way to gain access to capital or the best fit for all small businesses. Thankfully, the UK’s business funding landscape has expanded, populating it with various alternative financing options for small businesses.

From crowdfunding and peer-to-peer lending to grants and angel networks, many flexible and speedy alternative funding options can enable small UK businesses to access the capital they need to grow and become successful. But with so many on offer, it can be challenging for want-to-be entrepreneurs to stay updated with the latest and greatest funding solutions for small businesses.

Therefore, we’ve created this article outlining the benefits, considerations, and requirements of several alternative funding options available to small UK-based businesses. By thinking beyond traditional lending sources, small businesses can open their doors to new funding opportunities that might help them source the capital they need to fund their success – keep reading to find out more.

Grants

Unlike traditional ways of sourcing funding that banks or lenders grant, innovation grants in the UK are awarded by your local governing body. Since this alternative funding method is usually given to an applicant with a high chance of success, businesses that want to develop unique products or test novel concepts are ideal applicants.

However, because innovation grants in the UK are given instead of borrowed, they are more challenging for businesses to receive. So how do you apply? Various factors can influence an organisation’s eligibility, such as size, net worth, etc. Due to this, it’s essential that you understand the requirements of each grant programme to determine your organisation’s success.

To make the process easier, consider enlisting the services of R&D specialists like Buzzacott, which can help manage your application on your behalf. Visit their website to learn more and discover how their team could help your business explore many of the UK’s innovation grants and see which one is right for your needs.

Crowdfunding

If your business has run into trouble trying to secure funding from lenders and banks, consider asking for donations from like-minded individuals on the internet using crowdfunding platforms. Using crowdfunding platforms like Kickstarter or Funding Circle, you can request financial help from family, friends, and their mutual friends to contribute to your cause.

Crowdfunding is an excellent way to gauge interest before your products or services enter the development stages or hit the market. As a result, it has several benefits, from eliminating the application process of traditional funding methods and reducing wait times to receive your funds to making it easier to reach people and taking the fear out of asking for financial help.

While crowdfunding can be beneficial, these benefits largely depend on the crowdfunding platform you use to source the funds. Some only allow you to crowdfund for a limited time, while others require you to meet a specific goal before you can claim any funds – so it’s worth taking your time to research available platforms before committing!

Peer-To-Peer Lending

Another fast-growing alternate finance source for UK businesses is peer-to-peer lending, which allows individuals to borrow funds from each other. It’s achieved using online platforms or offline brokers that aim to match borrowers with lenders after filling out an online form detailing the amount you want to borrow, how it will be used, how long you’ll need it and specific company info’.

Due to the nature of this type of funding, it’s generally only recommended for established businesses that are looking for a little extra help pitching new ideas or launching new products, and not smaller start-ups. Depending on which P2P platform your company decides to use, peer-to-peer lending allows you to reap specific benefits.

Various benefits can make peer-to-peer lending attractive to businesses, from reduced interest rates and better transparency/control to increased lending opportunities and instantaneous payouts. However, much like crowdfunding, these benefits can vary depending on which P2P platform you’re using, so ensure you read the fine print to avoid disappointment if you decide to go down this route!

Venture Capital/Angel Investment

Like crowdfunding and loans, venture capital/angel investment involves firms or individuals investing funds into start-ups. However, unlike the previous options, lenders who go down the venture capital/angel investment route usually look for something in return in exchange for lending your business capital (like a share in your business).

Generally, this alternative funding method is best for businesses that operate in a specific sector, such as online, tech, or medical. It provides various benefits providing that your business is ready for growth, from no repayments or generated interest to access to your investor’s contacts/knowledge. But a foolproof business plan, pitch deck, and exit strategy are necessary!