In many ways, the current economic climate is simply not conducive to SME growth, with companies struggling to expand due to a fundamental lack of strategic expertise and increasingly stringent funding guidelines. A recent survey underlined this, with 37% of respondents claiming that they had been turned down for finance during their first two years of trading.
A further 25% were also refused credit when they had looked to scale from a small to a medium-sized business, meaning that even relatively well-established SMEs struggled to realise their short and long-term growth objectives.
Top Tips for Entrepreneurs and Freelancers: How to Secure Funding and Drive Growth
This creates numerous challenges for both freelancers and entrepreneurs alike, as these entities have clearly struggled to either realise their commercial version or expand their ventures in line with increased demand. With this in mind, here are some initial ideas that will enable SMEs and independent workers to successfully fund their growth:
Start by Organising your Finances and Clarifying Your Value Proposition
Regardless of the investment avenues that you pursue, the vast majority will require to present a clear and attractive commercial proposition. This is particularly relevant when looking to access traditional vehicles such as banks and angel investors, as these individuals will perform a forensic inspection of your finances and demand certain guarantees regarding your proposed ROI.
In terms of the former, resources such as Companies House offer detailed and publicly accessible financial documents relating to registered businesses. As this example for Saxton 4×4 showcases, the type of documents hosted are diverse in the extreme, with everything from assets and annual reports to secured debts listed. Any outstanding credit issues or CCJs are also listed, so potential investors will be able to determine the risk that you may pose.
When it comes to clarifying your pitch, your key focus should be on determining a unique value proposition that defines your business and translating this into a core benefit. This must also be defined and measurable, as this enables investors to understand the return that they are likely to access over time.
Consider Quick Financing Options for Your Fledgling Venture
Depending on the nature of your business and the precise amount of money that you need, traditional lending options may not be viable. Instead, you would be better served by seeking out quick, flexible financing that enables your business to grow without being encumbered with huge amounts of secured debt.
When starting your new business, for example, you may need to access quick cash to launch your venture but lack the necessary infrastructure or assets to achieve secured credit or investor loans. In this instance, it would be wise to consider contemporary options such as equity crowdfunding, through which potential investors are offered shares in a burgeoning business in exchange for a fixed sum of money. This is a variation on the initial crowdfunding concept, with the only difference being that investors are now incentivised with physical company shares.
If you are loathe to give away equity, another option is to pursue unsecured personal loans that are taken out in your name and exist outside of the business. Whether you consider basic personal loans or leverage low-risk, personally-owned assets through vehicles like car title loans, you can access funds without compromising on the future ownership of the business.
Be Bold and Consider an IPO
Conversely, maybe your business has existed for a few years and established itself in a specific niche. It may have subsequently stagnated, however, while struggling to grow organically in line with demand.
In this instance, you will need to consider funding options that leverage the profitability that already exists within your venture. One example is an IPO, for example, through your business is publicly listed on the stock exchange and a fixed amount of equity is sold to external investors. This can generate huge sums of money depending on the size and appeal of your company, with the vast majority going to directors who can then reinvest this into the businesses infrastructure.
There are other benefits of this too, as a select few shares can also be offered to key employees, creating an innovative incentive that engages workers and drives loyalty (particularly within job roles where longevity is crucial). This can also compel your workers to become more invested in the business as a whole, as their own performance will have a direct impact on their final return.
These ideas can be applied at different stages of growth, but the key is to understand what you are trying to achieve before selecting a funding option that minimises risk, reduces debt and drives sustainable expansion in the future.