What is the biggest problem facing Start-Up businesses?
Well, ask any accountant and they’ll tell that the answer to that is getting access to funding, or more specifically traditional bank lending.
So what’s the problem? Well, in a nutshell it’s that many banks aren’t willing to take a risk when it comes to approving bank loans for Start-Ups particularly in the technology, food and drink and health and fitness sectors. How can we be so sure about this? Well, the evidence is clear for all to see: many banks may have stockpiled resources over recent years, but the harsh lessons of the recession have made many risk-averse.
The extent of the banks’ unwillingness to lend has been highlighted in a recent study by UK business angel network, Angels Den. The study of 821 British entrepreneurs that have launched small businesses since 2012 found that more than half had been rejected for a bank loan to fund growth. Of the businesses surveyed, only 19% were successful in securing any sort of backing in the form of traditional bank loans. The reason for the banks’ rejection was either a lack of business experience or perceived unrealistic financial predictions. Of the remaining businesses, 58% had funded growth by using a combination of savings and money borrowed from friends and family.
So what’s the answer then?
How can Start-Ups and SMEs get access to vital funding? Who, or what, can they turn to access the cash which will help their business grow? Well, in the opinion of Bill Morrow, co-founder and director of Angels Den, the answer just might be crowdfunding, that is the practice of funding a project or venture by raising monetary contributions from a large number of people, typically via the Internet:
“Unfortunately, it is all too often the case these days that promising start-ups with an excellent service or product to promote fall at the last hurdle, whilst trying to secure traditional investment.”
“We’re witnessing a number of start-up businesses turning to angel investors and online crowdfunding in order to secure investment. Not only is it a fantastic way of raising investment, it also gives you the chance to get some experienced and well connected business people on board.”
Does crowdfunding work?
Well, there’s no definitive answer to that. Accountants can point out numerous examples of where the practice has worked successfully; however, they’ll also be able to highlight many instances where it hasn’t. All we would say is that there’s no doubting that crowdfunding has its place in a market where getting access to money is becoming increasingly difficult, but there are other alternative strategies for raising cash to fund new products and services: strategies which our accountants will be able to advise you about.
If your SME is having difficulty raising finance, or struggling to find credit to fund expansion, then why not speak to Steven Glicher’s accountants? Our accountants can help your business raise finance and can give you expert advice on identifying the type of funding you need, finding the most suitable sources of finance, and calculating the cash-flow projections, budgets, and trading forecasts.
For further information give us a call on 0161 485 8007, or email info@.