Your Business Magazine 2022 - 88

" There are now many
diff erent sources of
loans and grants, and
new ways to connect
with investors "
access business assets such as equipment, machinery and vehicles
without having to buy them up front, is included too. Finance terms
are up to six years for term loans and asset fi nance facilities. For
overdrafts and invoice fi nance facilities, terms are up to three years.
Local business grants
In January 2022, the government closed the New Enterprise
Allowance, which off ered loans to unemployed people to start their
own businesses. At the time of writing, the government did not
have a replacement scheme.
However, local authorities have had a boost in discretionary
grants available for local businesses impacted by Covid-19, such as
the hospitality and leisure sectors. Similar grants are available from
Scottish Enterprise, a non-departmental public body of the Scottish
government. Contact your local authority for details.
Public support
Crowdfunding is a simple way to appeal to people with small
amounts of cash to give to projects they like the look of. You can
reach these " armchair investors " through websites such as
Kickstarter and Indiegogo, and one of the biggest upsides is you don't
have to pay anyone back. This type of funding tends to be used for
creative projects such as fi lms, books and albums, but social
enterprises and tech businesses have raised money this way, too.
As people aren't lending but giving, your success depends on your
ability to sell your idea. If you can persuade 1,000 people to give
you £3 each, that could be the £3,000 your business needs. Be
prepared to make a short video plea for funding and off er rewards
to people who give small, medium or large donations. You need to
set a date by which the money has to be raised. The catch is if you
don't reach your target, you don't get a penny.
Peer-to-peer loans
Companies such as Zopa and RateSetter have been responsible for
hundreds of millions of pounds being lent to UK small businesses.
Their websites act like online marketplaces, where borrowers and
lenders can fi nd each other. Both borrowers and lenders have to go
through a vetting process before they are allowed to either pitch for
money or lend to small businesses.
88
Lending support
Debt can seem like a dirty word in
business, but when it's used right it
can lead to bigger profi ts, explains
Steven Smith, client growth director
at Totum Finance
" Debt is a word that conjures fear in
a lot of people. It's normally caused
by not having enough cash to pay
a bill, so what you owe just gets
larger and larger. But if you use debt
as an investment, alongside your
own cash, this will generate larger
returns than just your cash would.
" The difference between good debt
and bad debt is subjective, and depends
on your circumstances. I would argue
that bad debt is borrowing to purchase
a depreciating asset, while good debt
is used for an appreciating asset.
" The way an SME makes profit
through debt depends on the needs
of the business. For example, say
a company needs to purchase a
new machine to provide additional
income, but the machine in question
costs more than the business's cash
reserves. The company borrows
the money it needs to buy the new
machine, and the increased income
boosts profits and pays the debt.
" Totum Finance is a specialist in
sourcing debt funding for purchasing
and building investment properties. We
succeed when our clients succeed. "
Your Business Magazine 2022

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