Where to find business funding post credit crunch

By: Sarah Arts

Date: 5 September 2011

Finding funding for your business is difficult in these post credit-crunch times. At BusinessFunding.co.uk, we recently discovered that the number of public sector-backed funding sources available to UK businesses has shrunk by at least a quarter in the past year alone, while the number of grant schemes has shrunk by a similarly large amount.

Bank lending has also been a cause for concern recently. The Government keeps putting pressure on the banks to lend more to small and medium-sized enterprises (SMEs), but many businesses are still finding themselves unable to secure finance.

Businesses in the regions may be finding it particularly hard to find funding and finance at the moment, with the North West and the Midlands faring particularly badly as a result of recent fund closures. And with spending cuts progressing apace across a wide variety of UK business funding sources, this trend looks set to continue.

However, all is not lost. The good news is that a wide variety of less-well-known funding sources do exist, from specialists such as asset-backed lenders and business cash advancers to crowd funding websites. Plus, it is reasonable to expect that further sources of funding will emerge as the recently established Local Enterprise Partnerships and Enterprise Zones begin to take shape.

For those seeking loans, the Community Development Finance Institutions (CDFIs) may be a good alternative to the banks. CDFIs lend money to businesses, social enterprises and individuals who struggle to get finance from high street banks and loan companies. Some are even approved to lend under the Enterprise Finance Guarantee, a scheme in which the Government provides a guarantee to the lender, enabling SMEs with insufficient or no security to secure a business loan.

Of course, the more traditional equity investors will continue to play an important role. Indeed, equity investors are particularly active and have provided funding of more than £500m into UK businesses so far this year. From venture capital funds to angel investors, there are plenty of options for those seeking equity investment for their business.

Applying for equity investment can seem daunting and businesses must ensure their proposal genuinely has the potential to offer a good return to investors. However, provided it ticks this box and is presented well, investors will be interested and equity investors are often willing to support the business through its growth stages in order to ensure a good return.

However, it is worth keeping in mind other sources of funding, particularly in these troubled times when the competition for equity funding is high. Looking beyond traditional sources of grants and government-backed funds towards more novel sources could increase your chances of receiving funding.

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