Funding business growth

One of the first ports of call when looking for investment may be friends and family. You may have a relative or friend who wants to invest in the growth of your business and this type of investment can be very tempting as it removes the need to pitch to external investors.  

However, friends and family should only invest money they can ultimately afford to lose and you should set out the terms of any investment clearly with a signed agreement, taking legal advice to protect both parties. 

External investment is the process of securing funds from an external party looking to invest in growing businesses. 

This will be very different from raising money from friends and family as external investors will expect you to sell and pitch your business. 

Investors will be looking to see a strong business plan, sound management team and great product or service that will give them the confidence to invest.  

As part of exploring your funding options, getting in touch with your bank to see what they might be able to offer is a must. Banks provide loans, overdrafts and other lending facilities to businesses as part of their business bank accounts.

Unlike other sources of finance, bank loans always have to be paid back and have terms and conditions attached to them.

Loan repayment terms generally range between six months and seven years, with the rate of interest you pay linked to the length of the repayment period.

If you are unable to access a loan from your current bank or other banks, you can get business loans from credit unions, non-profit organisations, and online lenders.

Each lender may have tailored loans that best suit your needs so look around before applying. 

According to the Angel Investment Network: "Business angels are wealthy, private investors, who provide capital for young companies at the start-up phase or during a level of expansion."  
  
A business angel is looking for viable and high-potential businesses to invest in. Their goal is to work with the companies they invest in, using their experience and network to help them on their journey.  

The Angel Investment Network is a good starting point if you are looking for angel investment. It’s a membership organisation whose members can get in touch with business angels looking to connect with UK entrepreneurs in a wide range of industries.

If you are looking for investment over the medium to long term and are willing to part with a stake in your business, private equity could be the way forward. This type of finance tends to support management buy-outs and management buy-ins for established companies with the potential for high growth. Private equity can also help bring new expertise into the business to facilitate growth.  

Accessing private equity can take a long time (at least a year) and will typically involve instructing intermediaries such as lawyers, investment banks or advisers.  

There are also a lot of private equity firms whose job is to buy stakes in high growth businesses.  

The British Business Bank recommends that you seek independent financial advice from your accountant or financial adviser before agreeing to a private equity investment.  

Grant funding is another important source of finance for small businesses. Grants are made available for a whole range of purposes, from innovating new products and services to buying equipment, adopting digital technologies and adapting to new market conditions.  

Grants are typically delivered by local authorities, growth hubs, local enterprise partnerships and other economic development organisations.  

UMi delivers grant schemes for several local authorities across the UK.  

The UMi Funding and Grants Finder is a useful search tool for finding grants that your business might be eligible for. 

UMi provides a wide range of financial solutions on behalf of local authorities, devolved governments and economic development organisations. 

UMi Debt Finance, for example, is a £12m fund that delivers loan capital to small and medium-sized businesses across Scotland. More information can be found here. 

Swoop is another key funding resource and can help businesses with a wide range of capital requirements. Check out the Swoop comparison service here.