Alternative funding: what’s beyond the banks?

By Lancashire Business View

15 Mar 2017

Sourcing funding is often the most significant and possibly the most difficult decision any owner can make in the life of their business. Finding the right funding partner is critical for SMEs seeking capital to further their growth plans.

By John Davies, investment director, Seneca Partners.

Bank funding is no longer the default option. SMEs raising finance don’t automatically think of banks as their first port of call. There are a multitude of additional funding options open to them. The development and availability of alternative funding has given ambitious SMEs access to a more comprehensive range of avenues to funding. There are now various flexible and tailored solutions with the capacity to meet their individual needs.

That said, even the best SMEs are still finding it a challenge to source the finance they need. The provision of capital to growth companies is readily available but owners and managers don’t always know where to look. There is still a significant knowledge gap when it comes to understanding the diverse range of funding options available in the market for SMEs.

The list of funding options is lengthy and can be intimidating. Venture capital, angel investors, banks, peer-to-peer, invoice financing, crowd funding, accelerator programmes and asset-based lending. And this is only a selection. There are many more.

SMEs increasingly recognise that tailored funding arrangements may serve their needs better than a standard bank loan or overdraft. The alternative world of finance has been able to expand so successfully because it has been more flexible in terms of what the SME wants.

At its routes funding is split into two categories, debt and equity. Debt involves borrowing money to be repaid, plus interest, while equity involves raising money by selling shares in the company. Picking the right one depends entirely on your circumstances, for example, the amount of funding you require or whether you’re prepared to give away equity in your company to raise the funds you need.

If equity investment is under consideration then the trap many small business owners fall into is worrying about how much equity they are giving away in exchange for investment. What many will concede down the line however is that a smaller piece of a bigger pie is often better in the long-term!

One option that hasn’t been mentioned so far is self-funding, or as it’s otherwise known, the friends and family round. Borrowing from those close to us is often the easiest and quickest route to funding but it’s generally used in the very early days of a business as a type of springboard finance. When the time is right, other options offer more flexible capital that can provide a platform for the business to grow and achieve greater scale.

Speed of delivery when it comes to funding is often top of the agenda for entrepreneurs, because they always need the money yesterday. That’s where crowd funding comes in to its own. For the right opportunity they can complete deals extremely quickly but where SMEs miss out is that they don’t benefit as much from the knowledge and ongoing support provided by other funders in the space, such as Seneca. Whilst we can still complete quickly compared to other solutions, the strategic expertise and networking opportunities offered by us and other private equity funders further enhances the trade-off versus crowd funding alternatives.

Latest news

1

Double-digit growth sees Inspired near £100m revenues Mark Dickinson Inspired Plc

Double-digit growth sees Inspired near £100m revenues

26 Mar 2024

2

Five-fold growth for Chorley safety products firm Hispec

Five-fold growth for Chorley safety products firm

26 Mar 2024

3

Forward Thinking opens new franchise in South West 7386141d-8191-4a4c-b60c-0810e1692832.jpg.jpg

Forward Thinking opens new franchise in South West

28 Mar 2024

4

How the UK’s strategy to reduce net migration affects care work AdobeStock_89838327 (1).jpeg.jpg

How the UK’s strategy to reduce net migration affects care work

28 Mar 2024

5

Dealmakers: Star Tissue takes a leading roll Khalid Saifullah

Dealmakers: Star Tissue takes a leading roll

28 Mar 2024

Hwc 2024 Email Signature 980x120
Background image for hub sign up block

LBV Hub

Reach 50,000 members of the Lancashire business community

Post your news
Post your events
Post your offers
Company profile
Social reach
Magazine coverage
Sign-up
Events
Business Networking in Burnley - BNI Kudos
EVENT LISTING BNI Kudos.png.png
LBV Hub Networking
28 Mar 2024

Business Networking in Burnley - BNI Kudos

Prairie Sports Village, Windemere Avenue, Burnley, BB10 2FU

06:45 - 08:30

Business Networking in Lancaster - BNI Castle
EVENT LISTING BNI Castle.png.png
LBV Hub Networking
28 Mar 2024

Business Networking in Lancaster - BNI Castle

Vale of Lune RUFC, Powder House Lane, Lancaster, LA1 2TT

06:45 - 08:30

Business Networking in Preston - BNI Brunch
EVENT LISTING SIZING Brunch .png.png
LBV Hub Networking
29 Mar 2024

Business Networking in Preston - BNI Brunch

Samlesbury Preston Hotel, Preston New Road, Preston, PR5 0UL

09:30 - 11:00

Business Networking in Blackburn - BNI Infinity
EVENT LISTING BNI Infinity.png.png
LBV Hub Networking
29 Mar 2024

Business Networking in Blackburn - BNI Infinity

Hampton by Hilton, 2 Frontier Ave, Blackburn, BB1 3AL

06:30 - 08:30

Business Networking in Chorley - BNI Endeavour
EVENT LISTING SIZING Endeavour.png.png
LBV Hub Networking
02 Apr 2024

Business Networking in Chorley - BNI Endeavour

Oak Royal, Bury Lane, Chorley, PR6 8SW

06:30 - 08:30

Business Networking in Blackburn - BNI Vista
EVENT LISTING SIZING Vista.png.png
LBV Hub Networking
02 Apr 2024

Business Networking in Blackburn - BNI Vista

Hampton by Hilton, 2 Frontier Ave, Blackburn, BB1 3AL

06:45 - 08:30

Business Networking in Preston - BNI Diamond
EVENT LISTING BNI Diamond.png.png
LBV Hub Networking
03 Apr 2024

Business Networking in Preston - BNI Diamond

The Marriot Hotel, Garstang Road, Broughton, PR3 5JB

07:15 - 09:00

Business Networking in Lancaster - Eden Business Network
EVENT LISTING Eden Business Network.png.png
LBV Hub Networking
03 Apr 2024

Business Networking in Lancaster - Eden Business Network

The Borough, 3 Dalton Square, Lancaster, LA1 1PP

18:30 - 20:30

Business Networking in Accrington - BNI Zeus
EVENT LISTING SIZING Zeus.png.png
LBV Hub Networking
03 Apr 2024

Business Networking in Accrington - BNI Zeus

The Mill House, Corn Mill Yard, Accrington, BB5 5HX

06:45 - 08:30

Business Networking in Burnley - BNI Kudos
EVENT LISTING BNI Kudos.png.png
LBV Hub Networking
04 Apr 2024

Business Networking in Burnley - BNI Kudos

Prairie Sports Village, Windemere Avenue, Burnley, BB10 2FU

06:45 - 08:30

Business Networking in Lancaster - BNI Castle
EVENT LISTING BNI Castle.png.png
LBV Hub Networking
04 Apr 2024

Business Networking in Lancaster - BNI Castle

Vale of Lune RUFC, Powder House Lane, Lancaster, LA1 2TT

06:45 - 08:30

Business Networking in Blackburn - BNI Infinity
EVENT LISTING BNI Infinity.png.png
LBV Hub Networking
05 Apr 2024

Business Networking in Blackburn - BNI Infinity

Hampton by Hilton, 2 Frontier Ave, Blackburn, BB1 3AL

06:30 - 08:30

Advertise with us

Reaching 50,000 members, our print, digital and event platforms offer a fantastic way to raise your business profile and help you grow.

Find out more Lbv115 Online Graphic
Subscribe now

Weekly news bulletin