Hurrah the funding market is open for business!
Looking for funding for your organisation? Well, I haven't said this since at least 2006, but there appears to be cash available. Lots of it in actual fact.
Whilst I, like many, thought Brexit would severely damage financing potential, I have at this moment been proved quite wrong. Of course, I speculate this is a link, but whatever it is, it appears to be good news for the entrepreneur.
Whilst banks still remain the main critical source of funding for the SME market, they need to watch out, there is lots of competition.
Crowd funding has become main stream, it's quick and often significantly cheaper than bank lending and whilst it remains largely unregulated, it's a definite go to for sums small and substantial, the biggest to date being a block chain US company who raised $200m in less than two weeks!
The number of sites grow monthly and provide access to debt equity and donation based funds. It's quick, cheap, easy to access and often requires no credit history and no need for personal guarantees.
The regulation will eventually come though and I would suggest things will change, both for the investor and the investee. So, there is some merit in looking seriously at this area, sooner rather than later.
Online funding applications from multiple providers are also more prolific than ever, these short-term loans rarely need the same credit history that a traditional bank may require and the response time is rapid, often hours.
The disrupter/challenger banks are also taking a different approach to funding. Since 2012, 21 new banks have been given licenses. The latest being “app-only” banks, Tandem is one of them to recently enter the industry, with the five big banks still suffering severe repetitional issues, Millennials and Generation Y are flocking to this new breed of banks who are keen to secure a market position.
You may not have heard of corporate venturing, unless you are in the digital sector, where the likes of Reuters and Shell are creating incubator pods, using their money and often physical resources and the investee’s skills to create fast moving and lucrative partnerships.
Trade finance has been around for decades, once very constricted lenders, brokers including Amicus are more flexible than ever before and industries and debt once excluded are being actively courted.
There is an increasing ferocious appetite in the private equity market, but your deal may be too small for many lenders. One option is a convertible loan note, if you are less keen to give equity. This instrument allows you to change the status of a lend from debt to equity, should your circumstances change.
One new product is a SAFE agreement (simple agreement for future equity), this allows the lender to offer debt in return for equity at a future date often for a discount.
And finally, good old-fashioned Bootstrapping, in other words, funding the business yourself. Re-mortgaging your personal property is still likely to be the cheapest funding around, reward staff with equity instead of large salaries, build a plan around your budget, rather than around your wishes and negotiate on consignment stock and credit terms generally.
Good luck out there! We seem after 10 years of business funding austerity to be moving in the right direction… at last.
