The Best Small Business Funding Methods

Despite a challenging economic climate, new research conducted by LinkedIn has revealed that the number of entrepreneurs in the UK increased by 6.4% during the last year.

The rising number of small businesses has also created far greater demand for innovative and accessible funding options in the modern age, which has in turn enabled companies to establish themselves and achieve more sustainable levels of growth.

 

In this article, we will look at some of the best funding options for small businesses and the benefits that they deliver to entrepreneurs.

 

  1. Personal Stores of Wealth

 

If you are serious about developing a successful business, using a personal store of wealth to invest in this may be your best option. This is particularly true if you are willing to invest the money without recording it as a directors’ loan, as this reduces the long-term debt levels of your business and improves its chances of enjoying a profitable future.

To achieve this, you will need to build a store of wealth that is separate to your existing earnings and disposable income. This will require you to build a passive income stream, and one which can accrue funds as you continue to work and fund your own cost of living.

Trading the financial markets represents one of the best passive income investment options in the digital age, as assets can be accessed seamlessly online and diverse trading portfolios can be built over time.

 

  1. Factoring and Selling Your Accounts Receivable

 

In some instances, you may not require funds or a sustained level of cash flow until you have begun to undertake projects. This can pose a challenge, however, particularly as some clients may insist on adhering to 60 and 90-day invoice terms that restricts the amount of working capital that exists within your business at any given time.

This is where factoring comes in, as this allows you to sell your accounts receivable to a third-party investor (either as a whole or through individual invoice). This way, you will receive the value of the invoice immediately, negating the impact of prohibitive invoice terms and optimising your businesses cash flow as a result.

This also reduces the need to build long-term debt within your business, which is extremely beneficial in the current economic climate.

 

3.Equity Crowdfunding

 

If you have a truly compelling business idea, a valuable piece of intellectual property or ambitions of building a large-scale venture, you may need to seek out access to larger funds and more structured investment options.

One of the best contemporary examples is provided by equity crowdfunding, which encourages investment from a number of individuals who have an interest in your proposition. Equity crowdfunding differs from the original iteration of the practice, however, as it rewards investors with a fixed equity share in the business that reflects the amount that they have staked.

This creates greater incentive for serious investors, while it also creates a structure through which you can accrue more funds. The key is to determine the precise amount of capital that your business needs, while also determining how much equity you are willing to give away in exchange.