There is no escaping the fact that starting a new business from scratch is a challenging undertaking, whatever your experiences are or your ambitions might be. And certainly one of the toughest aspects of the process is likely to be finding the financing you’ll need to see your ideas start turning into reality.
With this in mind, we’re going to take a look at some of the latest ways in which an ambitious entrepreneur might look to finance their new business if mainstream routes to funding prove inaccessible.
1 – Peer-to-peer finance
You may have heard by now of websites and funding platforms such as Kickstarter, which are increasingly being used as methods of generating cash for new businesses. Such sites are broadly described as offering peer-to-peer financing and they often grab headlines when new products or ideas generate stacks of cash in no time. But the principles underpinning these sites have broader uses and they are bringing more and more investors together with new businesses in need of funding.
2 – Alternative overdrafts
You might think of overdrafts as being specifically the preserve of recognized banking institutions but there are a growing number of organizations that offer similar services on a standalone basis. Overdraft facilities can provide vital financial flexibility during the early months of a new company’s development and alternative overdraft providers are increasingly making their services available to start-up operators in the US and elsewhere.
3 – Cash flow loans
If your business is already up and running but you are fending off cash flow concerns on a consistent basis then there are now loan deals available to help. The terms of these loan facilities tend to be linked to revenues and income streams but they can be a big help if your margins are being squeezed in the early stages of developing a new company.
4 – Pension-led financing
Another increasingly popular means of funding a new business is the use of pension-led financing, which essentially involves individuals using part of their own pension funds to provide backing for a new business idea. There are risks involved in this form of financing but when considered carefully, it can be a smart way to inject cash into a newly created venture.
5 – Invoice factoring
Our final means of funding a new business again requires your company to be up and running and in a position to leverage the value of an existing sales ledger. Invoice factoring is an increasingly straightforward and commonplace means of effectively selling invoices to raise immediate cash. It won’t be the right option for every business but if immediacy is a prime concern for your new company then it can be well worth careful consideration.
Whatever your situation as an entrepreneur or the boss of a new business, it can help to get expert advice on funding at regular intervals and to be aware of all the options available before you make important decisions for the future when it comes to business finance.
Mark Halstead is from Red Flag Alert , part of the Begbies Traynor Group, and is now in his 10th year with the business. He’s worked at companies across the financial services industry and is a fellow of the Institute of Sales and Marketing.