Running a small business can be both exciting and challenging. One of the biggest hurdles many business owners face is securing the right finance to help their ventures grow. Whether you’re looking to expand, invest in new equipment, or simply improve cash flow, there are plenty of finance options out there. In this blog, we’ll explore the best finance options for small businesses in the North East of the UK, keeping things straightforward and professional.
1. Government Grants and Loans
Government grants and loans are often the first port of call for small businesses. They’re designed to give a boost to local enterprises, especially those that are creating jobs or driving innovation.
Types of Support:
North East Local Enterprise Partnership (NELEP) Funding: NELEP offers a variety of grants and loans to businesses in the North East. These are often sector-specific, targeting industries like tech, manufacturing, and creative sectors. They aim to support projects that will create jobs or bring investment into the region.
Start Up Loans: These government-backed loans are specifically for new businesses. They come with relatively low-interest rates and offer guidance and support, including free mentoring.
Innovate UK Grants: If your business focuses on innovation, research, or technology, Innovate UK provides various grants to support your development and help bring your ideas to market.
Why Choose Grants and Loans?
Low Cost: Grants don’t need to be repaid, and loans often have lower interest rates than commercial options.
Support and Mentoring: Often, these funding options come with business support and mentorship, giving you expert guidance to grow your business.
Tip: Grants are highly competitive, so make sure your application clearly shows how your business aligns with the fund’s goals.
2. Bank Loans
Traditional bank loans remain a popular choice for many small businesses. Banks like Lloyds, Barclays, and HSBC have specific products tailored for small business owners in the North East.
Types of Bank Loans:
Term Loans: These are straightforward loans where you borrow a fixed amount and repay it over a set period. They’re great for larger investments, like purchasing equipment or property.
Business Overdrafts: An overdraft allows your business to go over the amount in your bank account up to an agreed limit, giving you flexibility in managing cash flow.
Asset Finance: This type of loan is used to purchase assets, such as vehicles, machinery, or IT equipment, allowing you to spread the cost over time.
Why Choose Bank Loans?
Established Relationships: Many small businesses have long-standing relationships with their local banks, which can make the process simpler.
Flexible Terms: Banks often offer different repayment options, allowing you to choose a term that suits your cash flow.
Tip: Banks may have strict lending criteria, so ensure you have a solid business plan and clear financials before applying.
3. Alternative Finance Options
If traditional bank loans aren’t suitable for your business, alternative finance options might be the answer. These methods have become increasingly popular as they often have more relaxed criteria and quicker decision times.
Types of Alternative Finance:
Peer-to-Peer (P2P) Lending: Platforms like Funding Circle and RateSetter connect businesses directly with investors. It’s a quicker and sometimes more accessible way to get funding without going through a bank.
Crowdfunding: Sites like Crowdcube or Kickstarter allow you to raise funds from a large number of people, often in exchange for equity or rewards. This works well if you have a product or service with a strong public appeal.
Invoice Financing: This involves selling your unpaid invoices to a finance company. It’s a good way to access cash quickly without waiting for customers to pay their invoices.
Why Choose Alternative Finance?
Flexibility: Alternative finance options often have fewer restrictions than traditional bank loans.
Speed: The approval process is usually much faster, which can be crucial if you need funds quickly.
Tip: Crowdfunding requires a solid marketing strategy to attract investors, so be prepared to promote your campaign actively.
4. Equity Investment
For businesses with high growth potential, equity investment might be a suitable option. This involves selling a share of your business in exchange for funds.
Types of Equity Investment:
Angel Investors: These are individuals who invest their own money into startups in return for equity. They often provide not just funding but also mentorship and industry connections.
Venture Capital: Venture capital firms invest in businesses with high growth potential. They provide substantial amounts of capital but usually expect a significant share of the business and a say in strategic decisions.
Seed Funding: This is early-stage investment to help get your business off the ground. It’s typically used by startups to fund initial product development or market research.
Why Choose Equity Investment?
Large Funding Potential: It can provide more substantial funding than loans or grants.
Expertise and Networking: Investors often bring valuable industry expertise and connections, which can help grow your business faster.
Tip: Be prepared to give up some control of your business, as investors will likely want a say in how it is run.
5. Business Credit Cards
Business credit cards can be a simple way to manage short-term expenses and improve cash flow. They’re ideal for covering day-to-day costs, like purchasing supplies or paying for services.
Why Use Business Credit Cards?
Convenience: Easy to use for small purchases or emergencies.
Build Business Credit: Responsible use can help you build your business’s credit score, making it easier to access other types of finance in the future.
Rewards and Perks: Some business credit cards offer cashback or rewards points, which can be a nice bonus.
Tip: Be cautious with interest rates, and try to pay off your balance in full each month to avoid high charges.
6. Microloans
Microloans are small loans designed for startups and small businesses that may struggle to get traditional bank loans. They’re often provided by non-profit organisations or community lenders.
Why Consider Microloans?
Accessibility: Easier to qualify for than standard loans, making them ideal for new businesses.
Support: Microloan providers often offer additional support and guidance for your business.
Tip: Check out organisations like Transmit Startups or the North East Fund for microloan options.
7. Regional Support Schemes
The North East of England has several regional support schemes specifically designed to help local businesses thrive. These initiatives can provide both funding and business advice.
Key Regional Schemes:
North East Growth Hub: Offers support in finding grants, loans, and funding opportunities tailored to your business needs.
Enterprise Support North East: Provides a variety of funding options and advice for small and medium-sized enterprises (SMEs) in the region.
Tees Valley Business Support: Offers grants and funding for businesses in the Tees Valley area, particularly those looking to innovate or expand.
Tip: These schemes are highly focused on local development, so aligning your business goals with regional economic plans can increase your chances of securing funding.
Final Thoughts
Choosing the right finance option for your small business can be the difference between success and struggle. Each of these options has its benefits and drawbacks, so it’s important to consider your business’s specific needs, growth potential, and financial situation.
At accelerateNEbusiness, we understand that navigating the world of finance can be tricky, especially for small businesses in the North East. That’s why we’re here to help guide you through the process, ensuring you find the best finance option to support your growth and success. Get in touch with us today to see how we can help your business thrive.
