Yes, your accountant can absolutely help with sourcing money for your business, lending their expert knowledge and unique perspective to help you choose and apply for the financing option which is right for you.
What types of funding are available?
First things first, though – you’re probably wondering what types of funding are even available to you as the owner of a business. There are all sorts of funding and finance options available to businesses, so choosing something to suit your needs can be quite challenging!
This is important for you to understand, so let’s dive in.
Business bank loans
Around 30% of UK SMEs have a bank loan or overdraft, according to the British Business Bank.
The amount you can borrow varies massively, along with the terms and interest rates. For example, loans can be unsecured, or secured against an asset, affecting what you could be liable for if you struggle to make repayments.
An unsecured loan is less risky for you, but riskier for the lender and so they may need some form of payment guarantee up front. This often involves a guarantor who will step in if you struggle to pay but the application process can be more drawn-out even with that in place. You’ll normally need a very good rating!
A secured loan, on the other hand, can be riskier for you but this often means you’re more likely to be accepted for one. Essentially, you put up an asset as collateral, and forfeit it in the event that you can’t pay back the loan.
Small business grants
There are lots of schemes (both public and private) offering grants to businesses across the UK.
For example, landlords can apply for electric vehicle chargepoint and infrastructure grants which enable them to install electric vehicle chargepoints and supporting infrastructure in rental and leasehold properties.
The main draw of a grant over a loan is that it doesn’t have to be paid back. You’ll normally need to include it on your tax return as a source of income though!
It’s also important to note that grants tend to be location-specific (e.g. London or North West), and you have to meet certain eligibility criteria. For example, some are open to both the public and private sectors, while others are aimed at government-run organisations like local authorities.
For a full list of available government grants, have a browse here.
Crowdfunding
If you’re not familiar with crowdfunding, this is basically where you pitch your business idea on a designated platform (or social media) and ask people to invest in it. You’ll typically end up with a large number of investors, each putting in a fairly small amount (as opposed to the reverse).
You can even offer incentives with different levels of reward depending on the level of funding submitted. This could be as simple as promising access to your product or service, subject to enough money being raised for it to go into development (and this way, you’re not simply relying on the kindness of strangers). Just be aware that it’s another form of income, so crowdfunded income is often still subject to tax!
Investment platforms
With these, anyone can invest in exchange for shares – rather than a single large investor who’s carefully vetted.
As the majority of businesses don’t have shares available for purchase, this is only really an option for companies, and the way it typically works is a company will create a new share class so that these new shareholders receive dividends (usually at a lower rate to other shareholders).
Angel investment
This is where a wealthy benefactor – typically someone at the top of their industry – chooses to invest a sizable amount in your business.
They may want an equally sizable stake in it, but this isn’t necessarily a bad thing as far as you’re concerned; it means their interests will be aligned with yours, as they’ll want a return on their investment. As such, they may choose to share any knowledge they have (as well as relevant contacts).
Venture capital
Unlike angel investors who invest their own money in a business, venture capitalists invest on behalf of venture capital firms.
The money itself can come from a number of sources, including public and private pension funds, corporations, foundations, and wealthy individuals.
It should be noted that venture capitalists are typically looking to invest much larger amounts, often into the millions of pounds, and this means they’re only really interested in businesses with high growth potential in fast-paced areas.
How can my accountant help me secure funding?
The real question is, how can’t they help you? Your accountant will be able to explain all your options to you, based on your own unique situation. They can also assist with things such as loan applications and preparing financial reports that show the information lenders and investors want to see.
These financial reports and forecasts will also help you to figure out what type of funding your business would most benefit from.
Ultimately, as a qualified expert in the field, it’s your accountant’s job to remove the guesswork and make your life easier.
Visit our accounting support hub for more help, and to compare fees for accountancy services.
