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5 Fresh ways to raise finance for your SME
The financial crisis was anything but enjoyable for the majority of business who were faced with banks that wouldn’t budge and loosen their purse strings. For many this led to absolute destitution with businesses simply unable to continue trading. However one silver lining around a decidedly grubby looking cloud is that the range of finance options before SMEs has increased significantly and here I present you with five of the freshest way in which business are seeking cash injections.
A TED talk on Finance
1. Credit Unions
Credit unions have been around for a good numbers of years and in some instances are actually as old as many of the high streets banks. Nevertheless they make for an entrant on my list due to the growth in popularity for SME financing.
2. Crowd Funding
Crowd funding may be considered as one of the most innovative forms of raising finance and involves the offering of some benefit in return for a small payment from each of a large pool of private consumers. This could be a credit within a book as offered by a budding freelance writer or it could be an invitation to an event or some similarly small exchange.
3. Invoice trading
Invoice trading can seem like a pretty complex concept to grasp, however the basic premise is relatively simple. Invoice trading would involve you selling invoices that are yet to be paid, these are auctioned to the highest bidder who pays you at the close of the auction. Then, when your client pays, the bidder receives the funds.
This may not come under traditional finance raising, however it has served as a way of businesses keeping their cash flow healthy and being able to grow, rather than recede, in times of trouble.
4. Peer-to-peer lending
Peer-to-peer lending can be considered as the people’s triumph form the credit crunch. This market operates, quite simply, with private individuals financing SMEs that need cash injections. In between these two bodies there is an intermediary company who manages the process and pools all investor money so that the risk is spread between consumers, as opposed to investing in a singular business.
5. Payday Loans (N.B. This is one NOT to use)
Just as with private consumers the payday loans market continues to expand apace and whilst this makes for an entrant onto my list because of the sheer growth and increasing number of SMEs using Payday loans, I don’t recommend them.
Whilst the market is changing and the government is showing signs of cracking down on what was previously an unregulated market it still remains an option for only those who have nowhere else to turn (and for whom such products with incredibly high interest rates should avoiding at all costs).
Focussing on business success beyond financing
Hopefully the ideas for fresh finance options above provide a range of options to SMEs who would otherwise still be struggling for choices beyond that of the bank manager. Let me know what you think of the changes that have been seen throughout the financial crisis and beyond - do you think it’s been an empowering experience for the SMEs left behind?