Finance · 14 October 2015

Is it really that hard for small businesses to access finance?

While many businesses struggle to access finance,  the growth of alternative finance has been accompanied by a wealth of information on what's out there
While many businesses struggle to access finance, the growth of alternative finance has been accompanied by a wealth of information on what’s out there
Access to finance is frequently pointed to as a stumbling block for smaller businesses and their growth ambitions, but is it really as significant an issue as is often made out?

KPMG’s Bivek Sharmabelieves the answer is a definitive yes. If you think about the journey of a business from its starting point, and the amount of effort, time and money you’ll spend to grow it is considerable, he said. From a firm’s conception in its early days, you might be talking personal funds, or contributions from other people like friends and family, then moving onto the more formal routes of funding and there’s a huge amount of groundwork involved.

While Sharmafeels it’s not ideal? that access to finance is so tricky, and too many micro firms run into trouble here, it does make sense that is tough. If you’re asking someone to help finance your business, they’ll want to know exactly how you’ll use the money and need to be convinced that you will be able to pay them back.

Additionally, while access to finance can be a rocky path to tread, Sharmanotes there are a few obvious steps you can take to make sure it’s as free from difficulties and obstacles as possible. Fundamentally being aware and preparing properly for each stage is critical, he said.

Funding isn’t always as obvious as businesses think it is. Sharmapointed to the example of an early-stage firm seeking a talented individual to join the team without many offerings to woo them with. You may opt for share options as an alternative to a higher salary in the early days in a way it’s a twist on funding. It’s sensible, therefore, to spend time looking into options, and Sharmafeels the growth of alternative finance has been accompanied by a wealth of information on what’s out there in itself providing invaluable insight into how others have successfully found funding, and how to replicate their success.

look at the Scottish brewery BrewDog for example it has equity crowdfunded a few times now, and it’s now experimenting with crowdfunded bonds. With successes like that, small firms can look at them and see how it’s done, he added.

Startup guides are widely available online KPMG for example provides a useful one delving into loans, equity, and crowdfunding, helping business owners understand what these all involve and what you need for them. They set out the initial background knowledge, but as the owner of a firm it’s crucial for you to do groundwork on who to approach and why.


 
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ABOUT THE EXPERT

Bivek Sharma has been a partner with KPMG for over ten years, specialising in accounting, tax and software. He started the Small Business Accounting division over two years ago with a goal to transform accounting services for small businesses. The team works with a huge variety of industry sectors and companies including coffee shops, technology companies, manufacturers, pubs, restaurants and retailers.

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