Small Business Investment – Debt, Taxes and Investment a Quick Guide…

If you are running a business nothing can be said to be certain except death, taxes and investment. Businesses that fail to grow or adopt – disappear. Almost all small businesses need investment, especially if they want to thrive.

Growing your business through sales or profitability requires investment, you can do this by

  • Reinvesting profits
  • Borrowing
  • Selling shares to investors
  • Looking at other sources of finance, including government-backed schemes

The small business investment journey usually starts with a plan and the following steps:

  1. Plan

Cliched as it sounds – you start with a plan.

You need to demonstrate you understand your business, and the risks inherent in it. A robust business plan will enable the business owners to articulate what they want to achieve, how they intend to do it and the impact of changing business circumstances on their plan.

The plan must be a living document as it will go through a number of iterations before it is presentable to potential lenders and investors. It is about stepping back from the business to critically review prospects, opportunities, challenges and risks – to form a credible view of the business opportunity.

2. Cash is king

Before looking at external investment, businesses need to make sure they are managing cash effectively. In addition to maximising cash, it demonstrates credibility to potential small business investors or lenders.

3. Research the market

The business maybe looking for debt, equity or both. You may wish to consider private funding or government backed funding and grants. The development stage of the business from pre-trading through to fully established, will dictate the equity and debt options available.

To discover the funding options available, we recommend you visit The Business Finance Guide . The guide covers seed equity finance through to IPO/public offering, debt financing from start-up loans through to growth finance, debt/equity hybrids and some government help.

If you want to look at government supported finance options visit – . You can target the investment you seek by industry and region, tailored by your business stage of development or use the full search capability.

All businesses are different but generally a pre-trading/pre-profit company will be limited to seed and angel equity finance and start-up (government backed) loans. Government backed grants may also be available.

As the business starts to grow but is not yet profitable, it may seek further angel finance, equity crowdfunding, venture and corporate venture capital. It may also be possible to obtain growth finance including venture debt, overdrafts and asset-based loans.

As the business continues to grow and either is profitable or has a clear path to profitability, the equity options will increase to include private equity and possibly a public offering. The debt options will expand to include bank loans, bonds and peer to peer lending.

The more established, profitable and better growth prospects a business has, the more debt and equity options will be available.

4. Invest in advice

Good independent advice is invaluable. The advice should be tailored to match your needs now and as your business grows. You want to work with people who will help you to make more informed decisions supporting your strategy, direction and growth. Your advisers will have experience of many businesses and should be able to provide both an internal and external perspective of your business proposition.

The government website mentioned above –  has an expertise and advice search option.

Or go local and visit your Local Growth Hub –

5. Launch

Having updated your plan, researching the market and getting suitable support and advice you should have a good idea of the most appropriate and attainable financing options available for small business investment.

To secure equity and or debt financing you need to make your proposition clear to your target investors. You will need to illustrate how debt and interest can be repaid or refinanced. Equity investors will want to how they can exit or refinance the business and realise their investment.

You should identify how you are going to approach your target audience and allocate sufficient time to what will be a time-consuming task. You should anticipate a number of negative responses of your proposals and plan to learn from these rejections.

Hopefully you will get to the stage where you need to evaluate offers. While the financials considerations are key, you should also consider non-financial benefits such as on-going help and support and how you see the longer-term partnership developing.

If you have any questions or would like an informal chat please contact The Smart Team for advice on small business investment or how The Smart Team can help your business grow.

A guest blog from our member


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