Business expansion in Britain has been hit by risks of a no-deal Brexit, causing the services sector to remain stagnant in the month of November. Brexit has caused many businesses to halt investment decisions, but there are still businesses struggling to find funding for their expansion.
Size will play a big role in business expansion. Larger entities able to secure funding using different avenues than small businesses, which often lack the credit and financial history to secure loans.
Crowdfunding is on the Rise
Crowdfunding is a fast-growing industry that is expected to grow into a $300 billion industry by 2025. Success rate will depend on several factors, including a convincing copy and the business’ unique product points.
Raising funds effectively may be difficult, but it depends on where your business is in terms of product lifecycle.
Kickstarter and Indiegogo have helped many companies get off of the ground, and they are a great way to launch a new product and bring it to market. Existing companies, especially businesses that have been open for years, may have difficulty with securing funds for just expansion into a new market.
Instead, crowdfunding for this form of expansion can be costly and may require:
- Securing funding from existing networks
- Funding from new and potential customers
When it comes to expansion, in the sense of bringing a new product to the market, crowdfunding works very well.
Personal Loan Options for Small Businesses
A small business that needs to expand will require either a good credit and financial history, or the owner will need to take on some of the risk when securing a loan. This means that there’s a personal liability for the loan.
If your business fails to pay the loan, you will be held personally liable.
For this reason, personal loans are often the last option when trying to secure a loan for any business means.
Loan types can range from:
- Long-term loans
- Credit cards
- Home equity loans
- Short-term loans
- Line of credit
In most cases, it’s only advised to take out a personal loan when the risks are low. For example, if you have received an order and need money to fund the purchase of materials to fulfill the order, you know that there will be funds available to repay the loan rather quickly.
You can find some lenders that will provide quick acceptance for those times when time is of the essence. Loanski will provide loans in as little as 10 minutes.
SBA Loans are a Must-Consider
One of your first points of contact when trying to secure funding for expansion is the Small Business Administration (SBA). Banks and traditional lenders often shy away from providing loans to smaller companies.
There’s too much risk involved when lending to smaller businesses.
But the SBA aims to give smaller companies a fair chance of success. While availability is vast with an SBA loan, there are qualifications and restrictions that must be fulfilled. One key qualification is that the funds are only guaranteed when:
- Businesses can prove that they can’t fund their loan using other means
Your business will have had to be turned down for loans from other institutions and lenders. It may be difficult to meet the criteria for a loan under the SBA, and the criteria may increase as the amount of the loan increases.
Different options include:
- 7 (a) Loan Program
- 7 (m) Microloan Program
- SBA Express
- 504 Loan Program
Factoring is Another Option
Factoring can provide immediate cash, but you’ll also lose some money in the long-term. Let’s assume that you have $10,000 in receivables that have yet to be paid. The factoring company may pay you for these receivables with a cash advance.
You will have to pay a percentage to the company, so let’s say that you’ll pay a 10% premium, or $1,000 to the company for the financing.
There are companies offering substantial factoring options that may stretch out over the course of a year at a lower interest rate.
Startups that have a truly unique product or service may also be seeking angel investors or venture capital to fund their expansion. But these two avenues are often much harder to pursue when you’re a small mom-and-pop store that doesn’t have a unique product or offering that can result in quick growth and a quick sale of the company.
When in doubt, you also have the option of “crowdfunding” with friends and family. Many of the world’s largest businesses were started with the financial help of loved ones.
