1) What do you need the funding for?
The size of your business and the purpose of the funding will play a key role in deciding which method of alternative finance you should look for. Crowd-sourcing platforms such as Crowdcube and Kickstarter are often used to raise finances to create new products as those making the investors tend to rally behind a product rather than a company.
If you’re considering expanding, then methods such as the Growth Business Fund which lends money over long period of time to already established businesses is an option as is using invoice financing options
2) What are you willing to sacrifice
While alternative finance may seem a lucrative alternative to a traditional bank loan, requiring business owners to get into debt to expand their business, there is no such thing as free money and all alternative methods will require some level of company sacrifice. With this in mind it is important to consider what it is you are willing to sacrifice. For instance, while certain methods such as Angel funding are a way of getting long-term finance without the risk of debt - in return you will be expected to give your angel investor a stake in your company.
On the other-hand crowd funding is a way of raising capital with very few obligations - but those investing are individuals with low net-worth. Should you require more future funding this will not be as readily available.
3) Do you need long-term or short-term finance
Some methods of finance offer opportunities for long-term funding such as the Business Growth Fund. However, if what you’re looking for is a short-term injection of capital then there are often finance options to borrow money against outstanding orders.
In tomorrow’s instalment of the alternative finance series, we address the importance of raising awareness among SMEs…