My business needs money but I don’t want a bank loan

Getting your finances right is arguably one of the hardest things to do within business. It doesn’t matter how good your idea is, or how well run the business is, if the funds aren’t coming in the right amounts or at the right time, it makes things very difficult. For many business owners, when either attempting to raise finance for a new business, or to fund growth, a bank loan often seems like the best idea. However, sometimes a standard bank loan just won’t cut it. It could be because of the repayment terms, guarantees, or that you simply can’t get one. So, what can you do if a traditional bank loan is out of the question?

Thankfully, there are plenty of solutions available to those that don’t think a bank loan is the best option.

Family and Friends

Borrowing money from friends or family has lots of positives, but it can always be a massive risk. In the business, there are no guarantees and if you borrow money from those close to you, without the ability to ensure the money will be repaid it can cause lots of rifts. On the other hand, borrowing from someone you trust, without the intense pressures of a traditional loan can be hugely beneficial and can take away some of the stress. Depending on the agreement you come to, you could even end up having an interest free loan, or potentially a very low-interest loan.

If, however, you have friends or family depending on you financially for results and you fail to deliver, it’s important to think about the impact it can have on other people’s lives.

External Investments

Aside from taking out a loan, there are options for getting extra investments from outside the business. This can come in many different forms, but usually it means that the business will have to give up a percentage of their value.

Angel investors

Angel investors will normally invest in new businesses at the start of their lifespan. However, that’s not to say that these types of investors won’t put money into a business whilst it’s growing. In terms of securing angel investment, business owners will often find it a challenge to even organise a meeting with them. They are notoriously difficult to get hold of. On the plus side, angel investors will more often than not provide additional strategic investment, providing a wealth of valuable experience to the company they’re looking at investing in.

Most angel investors are individuals and will often seek shares or a percentage of the company in return for the money they offer. If they aren’t seeking a share of the business, then like all investors they will look for a positive return on their investment and repayment as soon as possible.

Bridging Loan

A bridging loan is a means of short-term finance and is specific product, designed to bridge the gap between the sale of a property and the purchase of a new property. Completely different to a mortgage. The bridging loan is meant to fill the gap between a falling due on a property and then the main line of credit from the main lender becoming available.


If venture capitalists or angel investment isn’t a realistic option for you, crowdfunding can be an excellent source of raising additional capital. Crowdfunding works on a collective contribution basis, with business owners putting their ideas and thought out there onto an online platform. From there, owners can invite individuals and institutions to invest in the business. They do not have to be traditional investors and could just be ordinary people who like the idea of the business.

There are different means of getting involved in crowdfunding. Some people will invest simply because they believe in the cause, however, this is generally in the case of charities or community projects. Some investors will only put in small donations and depending on the business will normally be met with a small reward from the business.

Invoice finance and alternative finance

For businesses who don’t want to give up any shares or percentage of their business through investment and don’t believe that a bank loan is a viable option, ‘alternative finance’ can be a great option. Invoice financing is an excellent option for obtaining monies quicker. Effectively it allows the business to obtain an advance based on the value of outstanding invoices. Only available for B2B businesses it means that they can access cash quicker and can grow the business, or ease cash flow troubles much quicker.

The factoring company would initially analyse the quality of the invoices in question and then take a  look at the risks involved with your clients. You would then be advanced a percentage value of your invoice, typically up to 90% before the factoring company collects the invoice from your client, taking the fees they’re owed and then eventually returning the remaining cash. Not only does it provide an advance for the business it allows owners to spend time working and developing the business. There are factoring rates involved, but as this is typically short-term work, it tends to work out cheaper than a traditional bank loan.

In terms of alternative finance options, it all depends on the business and what it needs. There are lots of forms of commercial finance which give businesses chances to take out loans based upon the value of their assets, or lease out new assets which are paid out over a period.

Regardless of how you gain extra investment from a business, it is always going to be a challenge. What any new business owner must consider, is if the reward is worth the risk? Has the appropriate market research be done? Is there enough room within the marketplace to succeed? Planning is the most important part of starting any business venture.

Acquiring extra investment is difficult for any business. Regardless of how big or successful the business is, securing additional finance comes with it’s risks and rewards. But if that extra cash could be the difference between bailiffs coming over, or growing the company, these alternative methods of finance could be hugely beneficial.

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