Running a successful business means managing healthy cash flow, growing sustainably, and choosing business tools that get the job done for a good price.
Finding a source of finance for small business is an essential part of growth. Just like everything else in business, there’s a lot of choice – short and long term, internal and external, flexible and one-size-fits-all.
What are the best small business finance options, and how to decide which is right for you.
Decide what your biggest needs and wants are
Different types of finance are designed for different businesses with different needs. This is what to look for when you’re doing your research.
How quickly can you get your money?
If you want to get things funded right away with sources of short term capital, you’ll need the cash quickly and may have to pay a higher interest rate to get it. If you want to put long-term investment into your business, you might be able to wait a little bit longer. Usually though, you should be able to secure investment in a few days and get the cash shortly after.
How do repayments work?
You’ll make regular repayments to pay off your finance, but how they work can vary a lot. Your loan could be short-term, meaning you’ll pay it off in a few months, or repayment could be over several years. Paying finance off long-term can mean paying smaller monthly payments, but more overall.
How much do you need to borrow?
If you want to buy a specific purchase or investment, you’ll have a specific figure in mind. If you can find some competitive, accessible finance, it might be worth borrowing for a few different purchases at the same time and paying them all off together. You might prefer to keep borrowing to a minimum so repayments are more affordable and your business doesn’t reach its credit limit.
Make sure you’ll profit from what you’re raising finance for
What you spend your finance on should have a positive, measurable impact on your business. However much you repay overall, what your business gets out of it should be greater. Otherwise, raising finance will cost your business more than it helps it.
If you use the cash to buy equipment and stock, it should help you generate more – or higher value – sales. If you use it to train your staff, they should help you improve customer numbers and reduce staff turnover.
Source internal finance if you can
Internal finance is money your business already has or can produce itself. This includes customer sales, credit from your suppliers, and selling business assets.
Sourcing finance from your existing resources is often the cheapest way to raise cash, but it might not provide enough revenue for a big project. External finance can help you fund major developments like renovation, building work, brand new equipment, and essential stock.
Every small business is different. Choosing the right source of business finance will make sure repayments are affordable, and you raise enough to fund the projects that will benefit your business most.
Find out how much your business can raise in 90 seconds
Try our business loan calculator. It will tell you how much you can raise, how long it will take to pay it back, and how you can keep repayments simple and manageable.