A guide to funding for SMEs

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Finding the best funding options can be difficult for small businesses

Small to medium-sized enterprises (SMEs) can often find it difficult to make ends meet, especially when first starting out. It is therefore essential that company leaders make use of any and all funding that is available to them.

Here we examine some of the many options open to SMEs across the UK that are looking to boost their finances in the current difficult financial climate, with many of these solutions easier to get involved with than some firms might actually realise.

Go to the banks

One of the first ports of call for any business when seeking to secure additional finance should be their bank.

Securing finance through these means offers some significant benefits for businesses, as the money granted will not mean a relinquishing of any share of ownership or control of the business.

A range of measures are now in place to help to fund improved support for SMEs across the country, with the Funding for Lending scheme helping to offer lower-cost borrowing for banks and building societies - meaning these savings can then be passed on to borrowers.

Meanwhile, the National Loan Guarantee Scheme helps to reduce the cost of bank loans for lenders by up to one per cent and means unsecured borrowing from banks can be a more affordable option.

Enterprise Finance Guarantee

The Enterprise Finance Guarantee (EFG) could be another way for SMEs to bolster their finances at present.

EFG provides loan guarantees to UK SMEs and aims to provide an additional lending facility to those businesses that have yet to build a proven track record of borrowing - an issue that could see them turned down for financial support by some traditional lenders.

It enables lenders to receive a 75 per cent guarantee on all loans they offer under the EFG banner, with EFG facilities on offer to clients including loans for working capital or investment purposes, a guarantee on overdraft borrowing, refinancing for existing term loans and much more.

Managed by the Department for Business, Innovation and Skills (BIS), the scheme can be applied for through participating lenders and offers loans ranging in value from £1,000 to £1 million, with repayment terms of between three months to ten years.

The Regional Growth Fund

Another excellent resource for SMEs to draw upon is the Regional Growth Fund (RGF), which specialises in supporting businesses of all sizes that are deemed to provide considerable value to their local area.

Available to companies that are doing their part to raise private investment and boost their local economy, RGF has seen more than  £2.85 billion of public money made available to businesses across England since its launch in 2010.

The government remains committed to providing support for companies that are looking to grow and it is for that reason that a further £297 million was earmarked for RGF in February 2015 for the following two years. This was the sixth round of investment for the programme.

Also operated by BIS, RGF is overseen by an independent advisory panel, which has the final say on all applications for funding.

Companies wishing to receive RGF support must demonstrate how the money that is being invested in them will represent a positive investment for the taxpayer, as well as outlining any potential risks and complying for a full due diligence investigation by the public body.

Finding other investment

Finally, it is important for companies to think outside the box when it comes to boosting their coffers.

Taking the time to research the myriad options that are open to them will likely uncover several avenues not even touched upon in this article, but it is important for business leaders to do this due diligence if they wish their company to flourish.