I attended a session run by Aston Business School on funding for growth. The time was spent on sharing different methods of funding for an organisation or business.
For me, the message that was reitterated was that funding is available, and it is an increased understanding of risk by the entrepreneur or business owner that is required to make sense of the different terms and options available.
So, for an entrepreneur, what does this mean?
If we thinkabout an early stage entrepreneur, one that has a seed of an idea or more developed understanding but has not got proven capability yet, then it is unlikely that external funding will be available. The source of funding at this stage should be self, family and friends and preferably not debt but equity stake.
As the track record increases so to does the viability of securing external funding. Simply put, the risk to lender decreases and track record and proven capability improves.
As the cycle continues, a lender might offer lower interest rates and remove requirements for personal guarantees.
As an entrepeneur, we need to understand this. We need to understand this risk equation, we need to put ‘skin in the game’ and not expect alternative lending sources, banks and venture capitalists to engage with our early ideas. There are probably schemes out there that can assist but we need to be realistic.