By Farah Khalique
So you've decided to grow your fledgling business and need the financing to make it happen. But how to go about it?
Gone are the days of simply meeting your local bank manager for a chat about a loan. These days, the bank may well take one look at you and come back with: "Computer says no."
Non-bank financing routes - alternative finance - has mushroomed to meet the needs of new and growing companies (NGCs), but the options are endless. 'Burrito bonds', invoice financing, business angels, equity crowdfunding - where to start?
The Association for Financial Markets in Europe (Afme) has helpfully designed a 'Decision Tree' to help NGCs figure it out - whether your business has a turnover of less than £4m or more than £20m, there is an option for you. You might be able to issue a bond - whether that be a traditional public bond, a private placement, a retail bond or even a crowd-funded 'burrito bond' - or you might be better off asking friends and family.
The trade body has put together a practical guide to securing loan, bond and equity funding for Europe's small and medium-sized businesses, with case studies for innovative NGCs like mobile-shopping app Shareight, as well as more traditional businesses such as a dairy farm. See the flow diagram below on page six of the report 'Raising finance for Europe's small & medium-sized businesses'.
Alternative finance is still underdeveloped in Europe, especially compared to the United States (Bridging the Growth Gap), and Afme is keen to play its part in educating European businesses about their options.
Simon Lewis, chief executive of Afme, says: 'Our wholesale capital markets members are the link between businesses of all sizes and a range of different types of investors. We believe that their expertise in preparing this guide can provide new ideas to European companies looking for the best way to access various types of finance."
Farah Khalique is a freelance business and financial journalist, with a keen interest in writing about non-bank financing solutions that can help SMEs grow their business. She has written extensively about banking scandals and has made TV appearances on Sky News and The Wall Street Journal Live to comment on topical issues including money laundering and bankers’ bonuses. Follow her on Twitter