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The Best Sources of Finance For Small Businesses

Sources of finance for small businesses are not always easy to come by. The issue is that banks and other financial institutions tend to favour big businesses over small ones, meaning that the latter often find themselves with limited options when it comes to getting funds. While many small businesses are forced to turn to outside sources, some do manage to find the money they need by using some of their own assets.


Blog cover for Jack Willoughby's Post - The Best Sources of Finance For Small Businesses
The Best Sources of Finance For Small Businesses

Finding Sources for Small Business Financing is all about getting creative with your business plans and looking for ideas to use existing resources in new ways. In this article, we are going to look at the most common yet useful sources of small business finance, running you through all the options available so that you will be able to make an informed decision about what is best for your business. Later in this article, we are also going to look at a few ways of managing small business finances so you can properly use the sources for positive results.


Small Business Finance Options


As we said earlier, small businesses can either find inside finance options such as using their own assets or outside options such as using bank loans. Sources of finance for small businesses may not be readily available to you, but there are still a number of options that you can choose from so that you can keep your company moving forward and growing at the pace it deserves to. Let’s take a look at some common sources of small business finance.


Inside Sources for Small Business Finance


Assets: Some small businesses find it easy to get the funding they need by using some of their own assets. Assets are things that are owned by the business and are an important part of the business’s total value. Assets can include things like buildings, vehicles, or even other materials that have some financial value. Using assets is a great way to get the small business finance you need while also saving on interest and other charges that are associated with outside sources.


Own Capital: Another way of getting small business finance is to use your own capital. Capital in a small business refers to the amount of money that you have invested into the business. Using your own capital to get the small business finance you need is a great way to keep things simple and easy, especially if your business has assets that can be used to get the funding it needs instead of using outside sources.


Friends and Family: Sources of small business finance can also come from outside the business, in some cases coming from friends or family members. Friends and family may not always be able to provide financial assistance, but they can definitely help out by providing advice and support that is vital for a small business. Friends and family may also be able to assist with the day-to-day running of a small business, allowing you to focus on the important things and grow your business quickly.


Outside Sources For Small Business Finance


Personal Loans: Personal loans can also be an option when trying to find the money you need for your small business. The terms are usually very favourable, as personal loan rates tend to be lower and the time it takes for funding is much shorter. Personal loans can also be paid back relatively easily, making them ideal for most small business owners.


Bank Loans: Bank loans are another popular way of finding small business finance. Small loans and bank overdrafts are available from a range of banks at very favourable interest rates, allowing you to get access to all the money you need without any hassles or charges. Bank loans also help to give you a great reputation with your bank, allowing you to get even better loan deals in the future if they like dealing with you and your business.


Credit Cards: Credit cards are also a great option for finding small business finance. Small businesses can use their credit cards to get extra funding when they need it, although this should only be used as an emergency source of small business finance and not a long-term solution.


Business Loans: Business loans are another option that is available to many small businesses. These types of loans can get you the money you need while also helping to improve your credit rating and making it easier for you to get other types of business funding in the future.


Finding a Business Partner: You can also look for a business partner to help you get the small business finance that your company needs. A business partner is usually someone who has some experience with running a business and should be able to give you some great advice about how to keep your small business growing and making more profit.


Managing Small Business Finances


Once you get your hands on some small business finance, it is important to learn how to manage the funds properly. Managing your finances can be as simple as keeping track of all the money that comes into and goes out of your business. This can be done using a number of different accounting methods or by using computerised bookkeeping software. You should also keep track of any loans you make to your business so you can make sure they are paid back on time, a process that can be made much easier by using an accounting system combined with bookkeeping software.


Accounting Software: You can find lots of great accounting software on the market that will help you get started with your small business. These packages usually include everything you need to keep track of the money in your business, including:

  • Cash flow monitoring and forecasting tools

  • Standing orders for payments and receipts

  • Automatic tax reporting for HMRC (HM Revenue and Customs)

  • VAT registration and management tools

  • Stock control systems and ordering processes


Bookkeeping Software: You can also find bookkeeping software, which is ideal for keeping track of all the money coming in and out of your business. Many types of bookkeeping software include tools that make it easy to record all payments and receipts without having to worry about things like tax reporting or VAT registration.


Business Bank Accounts: Once you have found some small business finance, you should set up a dedicated business bank account. This will help keep all your money separate from any personal finances and can also be used to make standing orders and transfer money between different accounts.


Financial Controls: It is important that you put some financial controls in place when getting started with a small business so that you are able to see any problems before they cause you too much trouble.

  • Constant monitoring and accounting for all income and expenses

  • Separation of duties between different areas of the business (e.g. inventory control)

  • Disciplined spending habits that only allow for reasonable and realistic budgets to be spent, with any excess going into an emergency fund or being used to pay down debt

  • Regular review of current salaries and wages, benefits, and other business expenses as well as monitoring future costs (e.g. advertising)


Hire a Professional: You can also find a professional to help you with your small business finances. These people will usually offer their services for an hourly or monthly rate and should be able to give you some great help in managing the money coming into and out of your company.


Conclusion


It is true that finding sources of small business finance is not easy. But you have to remember that every enterprise had to start out small, and the most successful companies in the world today got where they are because of their willingness to keep going even when times were tough.


Finding sources of finance for small businesses is indeed hard but managing small business finances is even harder. So in order to be successful, you have to be willing to learn how to manage the money coming into and out of your business. You don't have to know everything, you just need to find the right ways that can help you in managing your small business finances and keep growing your business.


Thanks for reading.


Jack Willoughby


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