Small business finance: Where can you turn?

With 2014 a record year for new business registrations, it appears people across the UK are in full entrepreneurial spirit. When the internet makes it so easy to get up and running, it's not difficult to see why.

One obstacle still faced by so many new company owners, though, is funding. Unfortunately, it really does take money to make money. Whether you need to pay staff, invest in a new bricks-and-mortar store or launch a new marketing campaign - it all takes money.

So where does that money come from? Well, you have a few options, and it pays to consider each one carefully.

Bank funding

Let's start with an obvious one. Historically, this is the first place most new business owners would have turned. In recent years, the recession has changed people's views of the banks, and finance has been more difficult to secure this way. Don't just assume you'll be turned down straight away, though.

A number of the big high-street names have started emphasising their willingness to support small and medium-sized enterprises (SMEs), especially in their local areas. It's a good marketing tool, if nothing else.

Your bank should be able to offer a range of loans and overdraft facilities to give you that bit of extra spending power in the early days - just make sure your own financial history is squeaky clean before applying.

Government grants and schemes

The state of Britain's SME landscape is of great interest to the government. It's a key part of the economic recovery. As such, there are various loan and grant schemes in place to help young and independent companies flourish.

Start Up Loans is one such initiative. It's designed to help new entrepreneurs get their great ideas off the ground. Prospects start by registering online and discussing their business plan with an expert from the Start Up Loans Company. Once the application process is up, applicants will be considered for funding. If approved, they'll not only get the loan but also access to discounted web design, accounting software and legal advice. There'll even be a mentor on hand to answer any questions.

Other useful schemes include the New Enterprise Allowance Scheme, which caters specifically for people on benefits like Jobseekers' Allowance or income support, while The Prince's Trust provides dedicated support to the next generation of Richard Bransons.

Crowd power

Starting a business, or even just running one, will always be a risk. You put big money into your brand and its products, in the hope that crowds of people will be impressed enough to invest. So what if you could guarantee the buyers before you even get started? These days, you can.

Crowdfunding really has changed the way people look at business finance. In 2013 alone, sites like Kickstarter, Indiegogo and Crowdfunder generated more than £500 million for all kinds of exciting entrepreneurial ideas. It might not be the most conventional route to take, but it's certainly worth considering.

Using the Kickstarter process as an example, here's how it usually works:

- You put your business plan up on the internet for all to see, and set a funding target.
- You then offer a range of different rewards in exchange for set donation amounts. For example: 'Donate £100 and receive one Hoverboard 3000 when the product is released; Donate £300 and receive a personalised Hoverboard 3000 with your name engraved in the side...' etc.
- Once the target is reached, backers' cards are charged and the funding is transferred (minus a small fee).
- If the target isn't met, nobody pays a thing. This way, there's no risk at all.
- You then begin your project and, when the time is right, repay your backers' faith with goods, thanks and whatever else you promised.

Some crowdfunding sites, like Crowdcube and Seedrs, help new business owners look for more traditional investment by allowing entrepreneurs to offer up equity in exchange for financial backing. With this approach, though, the funding will usually be spread across large groups of backers, as opposed to just a handful. This, once again, minimises risk for everyone involved.

Be sensible

One of the best ways to make it through the financially challenging early stages of business life is to simply be clever with the money you already have. The more sensible you are now, the less help you'll need from elsewhere.

Keep tight control of your finances right from the start, and use the data you have available to predict the future. Your projections won't necessarily be 100 per cent accurate but they should help you plan ahead.

There will of course be things you have to pay for, like energy bills and insurance. Thankfully, though, there are services out there that help you get the best deals. Make it Cheaper, for example, allows you to compare everything from phone and broadband packages to electricity and gas rates.

You're not on your own!

The moral of the story is: you really aren't alone. Finding financial help is likely to be an essential part of your business journey, but it doesn't have to be difficult. As you can see above, help is available in a number of different places. Just be sure to do your research and pick one that works well for your business.

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