SME financing

Greetings. I’m Jeremy Powers and neither you nor I are venture capitalists, but that’s totally okay. Why? Because there are several other options for SME financing you could take advantage of, beside venture capital.

Venture Capital

Before I go into detail about some of them, I should briefly explain that you can use venture capital if you feel that it would work best for your firm. This type of funding is based on investors purchasing an equity stake in your company in exchange for funding. Normally, the investors hold the stake for a few years before selling it to you or somebody else. Venture capital can work if you’ve run into a bit of financial trouble and are confident that quick money would solve them and you’d get back on your feet in no time.

If you want a mentor, as well as an investor, you can find a venture capitalist who would act in both capacities. These types of businesses are known as “business angels”. They’re an excellent long-term solution to any problems a new business owner might have, including, but not limited to, money problems. You can meet someone like that at a networking event, or via a mentoring program.

Corporate Venture

Corporate venturing is slightly similar to business angels’ financing method – it can offer mentoring and money. However, this method is quite broad in terms of what it can offer in addition to financial support. Some corporations have CSR initiatives that support their local businesses by offering marketing consultations, debt-finance and other things.

Public Equity

Another option is public equity – it’s not too different from private equity and venture capital, except instead of a single buyer purchasing a stake, multiple buyers do so after your business is listed. There is a platform for publicly traded SMEs called AIM. You can list your business in order to get support from potential investors who might be interested.


You can also take advantage of crowdfunding platforms which are on the rise due to a large number of emerging start-ups. Crowdfunding can be similar to publicly trading, i.e. getting a stake in the company in exchange for money, or you can use your product as consideration.

Supplier Finance

Alternatively, you can hire a financier in order to act as an intermediary between you and a supplier. This method is called supplier finance, and the financier would pay the supplier on your behalf. This solution could work both short-term and long-term, although its primary advantage is quick release of cash flow, so it’s best to use it on a short-term basis.

Online Invoice Trading

Nowadays, an option similar to supplier finance is gaining momentum. This option is called online invoice trading and it involves SMEs selling outstanding invoices over the Internet to investors in order to release some funds. These kinds of contractual relations can serve you both in the short and in the long term, depending on the state of your company and your plans.

Start-Up Loan Scheme

Another option that we can thank start-ups for is Start-up Loan Scheme. This is a government scheme designed for SMEs that includes mentoring and financial support. You need to apply for it and if you’re successful, you would be able to borrow some money with low interest rates. This can help you, both short- and long-term.

Government Loans

Another government initiative you can take advantage of is grants. There are a number of them available for SMEs and it’s likely that your region has its own branch of the Regional Growth Fund – one of the most popular schemes. The only issue with grants is that they’re quite difficult to secure and applications take a long time to process.

Pension-Led Funding

One option that carries quite a few risks but is nevertheless worth considering is pension-led funding. This involves releasing your personal funds held in your pensions fund for the purposes of financing your company. I suggest that you only use this option on a short-term basis.

Bank Loan

Of course, you can go old school and simply borrow some money as a bank loan, for example, as an unsecured business loan. This is mostly a short-term solution and a way for you to get some cash flow in the company. All you have to do is pay a percentage of card takings. Contact your local bank for more information.

It goes without saying that secured loans are always an option. Loans secured against business assets, such as owned property or stocks, are known as asset-based funding. This method could be a good idea if your company isn’t a new one and already has some assets to its name, because it would be quite difficult for a business that’s just launched to get loans secured against non-existent assets.

Traditionally, bank loans have been a mainstream source of funding for small businesses. However, in this day and age, quite a few alternatives I outlined above are available for your company. It is up to you to consider which one would be the best option.

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