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  • Writer's picture Cashbook Finance


Cashbook Finance - Blog
Cashbook Finance - Blog

It’s easy to assume that your business isn’t eligible for funding or convince yourself that it’s somehow better to go it alone and fund the business yourself instead of exploring financing options. According to a recent study published by Libris, up to 55% of UK SMEs miss out on valuable funding opportunities because they don’t believe they’d qualify for loans, don’t know what funding options are available, or feel that financial aid would compromise their ability to grow a sustainable business.

And that’s an issue, because cost-effective funding can help small businesses to:

- accelerate growth, and leverage emerging opportunities

- smooth over cash flow issues

- maintain inventory

- invest in new equipment or employ new members of staff

Loans and other financing agreements can also provide the vital cash injections that are needed to help SMEs avoid some of the common pitfalls that every business faces in the early stages of the growth cycle, which is why organisations like the Federation for Small Businesses (FSB) and the European Innovation Council (EIC) stress the importance of funding small businesses in the UK.

Funding can also be relatively easy to access, despite rumours to the contrary. To help you understand the financing options that are available for your business, we’re going to dispel a few myths.

New businesses struggle to acquire funding.

Today’s economic landscape is less forgiving than that of previous decades. The last recession and the subsequent economic downturn forced a lot of banks to dial back on business loans. Some lenders stopped financing new businesses altogether, while others became much more stringent about the money they lent out; often creating additional processes to help them analyse a business’s long term potential before offering some sort of funding. 

That doesn't mean that new businesses can’t acquire funding though. In fact, a study published by Small Business Trends show that 35% of startups successfully apply for (and receive) a small business loan of some kind, which just goes to show that it’s always worth applying for finance.

Of course, there are some things you can do to increase your chances of receiving funding, which include:

- Developing a strong business plan

- Organizing your financials, so lenders can see what you’ve achieved so far

- Offering up collateral to show that you’re serious about your business

But the first and most important step is to apply in the first place.

Debt is risky, and might stifle future growth.

Studies show that a large proportion of business owners view loans as a last resort, and tend to ignore finance options because they’re scared that shouldering large amounts of debt will stifle future growth. Fortunately, modern loan agreements are actually designed to promote growth, rather than stifling it, and are normally provided so that business owners can access the ready capital that’s needed to leverage exciting opportunities, and scale up their business in a sustainable way.

You often need money to make money, particularly if you’re trying to invest in marketing for your business, or want to bring new employees on board. You also need money to buy new equipment or implement the new processes that will drive future growth, which is why lenders are always keen to help growing businesses access the necessary funding.

If you’re avoiding funding opportunities because you’re worried about losing your freedom or stifling future growth, we’d strongly advise that you review your options. Many small business owners are surprised to find that borrowing can help them to realise their ambitions, but cost-effective business finance is an important driver of economic growth and an essential part of many small business plans.

Financing is disproportionately expensive for small businesses.

Small business owners often assume that loans will be prohibitively expensive because their business represents a risky investment, and lenders are generally unwilling to loan money unless they are guaranteed a high return.

Fortunately, most lenders see growing SMEs as a vital part of the UK economy, and invest heavily in small businesses all over the country. The democratic nature of the internet also means that prices are relatively flat and most lenders offer competitive rates to SMEs that have a solid business plan, and a reasonable handle on their potential.


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