Skip to content. | Skip to navigation

Personal tools
You are here: Home Focus Latest Trends in Small Business Funding

Latest Trends in Small Business Funding

One of the most common hurdles small businesses face when growing their company is making sure that there is sufficient finance to help this growth. Most small businesses, at some point in their evolution, need funding to grow - and many need funding to simply keep their heads above water.

Small Business Funding

But for many small businesses, accessing funding is a tricky challenge. Major banks are reluctant to invest in a small business, believing that the risk to their capital is too great. In fact, funding from the traditional big banks hasn't been a particularly viable option for small businesses for some time.

So, where does funding come from? And, more importantly, where is it likely to come from in the near future? Here is business funding explained and we also look at some major trends in small business funding that show how SMEs can rise to the challenge of growing and building successful organisations now and in the future.

What is the Climate For Small Business Funding?

Research clearly shows that the current period of uncertainty, which has been ongoing for some time, is affecting funding for small businesses and, consequently, small business growth. Many small businesses have been unable to expand. Others have been using funding to provide for contingency plans. Many have been reducing the amount of finance they need and delaying investment and growth decisions.

Rise of Alternative Financing

However, although there is a general trend in the demand for finance from small businesses, there is a growth in the awareness of, and demand for, alternative finance solutions. Alternative finance solutions are seen as more flexible and less risky in the current climate.

Research shows that small business finance markets are expanding to encompass alternative finance sources as opposed to simply the offerings from the larger banks. Alternative finance options provide the means for small businesses to grow. Alternative finance generally allows for smoother processing, faster decisions, and easier applications for small businesses. It is important for small businesses to be able to access finance quickly, and alternative finance organisations help in this regard, too. As demand for alternative financing grows, so too will the sources of alternative finance, meaning that small businesses should have a fruitful venue to explore for cash in the near future.

New Financial Technology Platforms to the Fore

If the big banks are not generating many funding opportunities for UK small businesses , there are alternative markets in the form of the new financial technology platforms. Fintech platforms are increasingly viable for small businesses looking for funding. Fintech platforms provide a set of integrated business and financial management software and services, allowing small businesses to access funds from new angles.

Open Banking Provides Opportunities

The rise of open banking is a great opportunity for small businesses as it allows these entities to access financial data and funds more efficiently and fairly. Open banking is more transparent, and uses an integrated set-up to provide more efficient credit decisions. Small businesses find they have fewer hoops to jump through in their quest for funding.

Businesses Need Flexi-Finance

Small businesses shift and change rapidly. Circumstances change and businesses grow and shrink. There is an increasing need for flexi-finance to meet small businesses' needs. Flexible financing such as funding lines are beneficial for businesses that need consistent fund sources but only so long as the need is there – businesses do not want to be tied into restrictive loan agreements. Funding lines allow businesses to grow when they want to grow – and to hold back when they need to. Through doing this, businesses maintain a healthy rate of growth and are able to expand within their means.

Businesses Nervous About Brexit

An increasing number of small business is concerned about the effect of leaving the European Union. Many are worried that an exit will make it harder to access finance. This translates to a trend of hesitation surrounding finance. Many businesses have been putting off accessing finance until the situation becomes clearer.

Crowdfunding Platforms Increasingly Popular

With the decline of traditional lending comes the rise in alternative methods of securing funds. Crowdfunding is one such method that has been rapidly increasing in popularity, particularly among start-ups. Crowdfunding is seen as a less risky way of raising capital and is also used by small businesses as publicity for launches and growth. A number of crowdfunding platforms provide funds for a whole variety of different purposes.

Businesses More Creative With Grants

Securing grants for small businesses is a tough challenge. But there is an increasing desire to release the opportunities that amass in grant funding. There are hundreds of grants available for small and medium sized businesses. Many are country-wide while others are restricted to certain areas of the country. Grants do not always come in the form of direct capital. For example, there is the government apprenticeship scheme that provides assistance in the form of labour, which also benefits young people.

Businesses with an interest in R&D can apply for grants such as the Innovate UK Smart Grants that provide funds for R&D projects that will have a significant impact on the economy. Tax credits are also available for small businesses. Businesses can also claim cash to go towards upgrading communications and infrastructure systems such as installing faster broadband.

How to Access Small Business Funding Opportunities

Small businesses need to be creative and persistent to take advantage of the many opportunities available for growth and development. Funding opportunities may not be immediately obvious. Gone are the days when a visit to the bank manager was all it took to secure the cash needed for development. But the good news is that, with creativity and persistence, the rewards are great. Alternative sources of funding are usually more flexible and user-friendly. They can be more effectively tailored towards the specific company and they usually have more lenient repayment options. All in all, the markets for small business funding look strong, although businesses will face strong competition for many sources.

Document Actions
EU Alerts

EUbusiness Week no. 851
Time to speed up climate action
→ EUbusiness Week archive

The Week Ahead no. 474
German EU presidency priorities - Just Transition Fund - road transport sector reform

Subscription options