4 ways to finance your small business that don’t involve a bank loan

Our friends over at Freeagent examine a few of the alternative options for small business finance.

Borrowing money from a source you’re familiar with can be a more comforting prospect than pitching to complete strangers. And when you only need to worry about paying the loan (and the interest) back within an agreed timescale, rather than having to think about fiddly issues such as dividends or equity returns, applying for a bank loan can seem appealing.

But unfortunately for many small businesses, this isn’t always quite as easy as getting an appointment, making a quick pitch, showing your bank statements and walking away with the money you need. Banks tend to have very strict criteria in place for who they will lend money to and there are often too many hoops for small businesses to jump through in order to secure the funds they need.

So what other avenues are available to you for funding a business if you want to avoid the bank loan route?

Ed Molyneux, CEO and co-founder of online accountancy firm FreeAgent – which is currently undertaking a £1m crowdfunding round, has put together a short guide for you right here.

Angel investment

Angel investment can be a great method for financing a business with strong growth prospects, as potential investors will consider the future potential of your business rather than how it’s currently performing. In addition, angel investors tend to understand that many small business owners often have limited business experience, but they also know that these founders sometimes go on to build very successful companies. However, that doesn’t make identifying investors and convincing them you have a strong business model any less of a daunting prospect. It’s a good idea to research thoroughly by looking at online communities, such as AngelList (http://angel.co) which can help you locate investors who are interested in your sort of business. Or, if you know any entrepreneurs who have already raised finance, ask them for feedback and see if they could give you a “warm” introduction to a friendly investor who may be interested in your business.


If you have a compelling product or service and you think you can highlight the value and potential of your business to a wider audience, crowdfunding could be a great avenue for you to explore for finance. If you’re an early stage business still developing ideas for your full product range, you may want to look at a platform like Kickstarter, where you provide incentives in return for investment (e.g. offering a free product or special experience). But larger businesses looking for wider growth can benefit from using equity crowdfunding platforms such as Seedrs to raise investment. Here at FreeAgent, we’re currently raising investment through equity crowdfunding for the very first time - if you’re keen to see how we’re approaching it, you can check out our campaign on Seedrs!

Alternative lending

Banks aren’t the only places that can give a loan to small businesses; there are many reputable organisations that provide finance for businesses in a range of different ways. You might be able to secure finance through a lender that specialises in short-term loans based on your trading or stock, for example. Take the time to thoroughly research the market and see what alternative lending options are available to you or, alternatively, check out a service like Funding Options which will do it for you. And remember not to be disheartened if you don’t succeed at the first hurdle – keep trying and always seek feedback to help you refine your pitch.

Small business grants

Although not necessarily a method for securing all of the money you’ll need to grow your business, it’s still a good idea to research through all of the potential grant schemes available in your region or industry, to see if you qualify for them. After all, some financial assistance is better than none!

If you’re unsure where to start your search, the UK Government website has a host of useful information to help you find potential grant and support schemes. Just remember that there will be many other businesses also applying for grants, so make sure your business pitch is as good as it possibly can be before you start making applications.

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