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Finance options for Welsh businesses

Start-ups looking to get off the ground, or small enterprises aiming to take their business to the next level, may want to consider applying for external funding. The type of funding that will best suit a business will depend on their specific needs and circumstances, but there are many options to choose from. From a standard bank loan to regional loans and grants specifically offered to Welsh businesses, the variety of possible funding sources means that even if a business is rejected from one provider, they may be able to secure funding from elsewhere.

Below are just some of the possible options an SME may want to consider:

Traditional bank loan

This is the first source of funding that many business owners may think of if they are looking to take out a business loan.

Particularly if a business is fairly well established, has capital, has a good credit score, and is wanting to borrow a large sum of money, banks may be able to offer competitive interest rates that make it a viable option for funding. However, the eligibility criteria is strict and the application process can be time consuming.

Challenger banks and digital lenders

Thanks to the rise of fintech and the introduction of systems such as Open Banking, businesses now have a wide choice of lenders available online, including challenger banks and peer-to-peer lenders. Because of their digital nature, these providers can often process a business loan application within hours. In contrast to the lengthy application process traditionally needed, businesses can share their financial information with the lenders so they can see the full history of the company, and not just work from a credit rating. These lenders are an increasingly popular choice for businesses, particularly those who can’t get a standard bank loan.

Development Bank of Wales

The Development Bank of Wales was launched in 2017 by the Welsh government, evolving from its predecessor Finance Wales. It is a large organisation that offers finance to small and medium enterprises across the country, with the aim of creating a stronger and varied economy in Wales. It offers a wide range of funding options and loan amounts to start-ups or for businesses looking to grow and expand, including micro loans, equity investment, seed finance, and other investment options. The Wales Business Fund is one of the largest funds on offer and is available to Welsh SMEs (under 250 employees) across a variety of sectors. The loan amounts range from tens of thousands to millions of pounds, depending on the needs of each business. The application process is comparable to other providers, as you would need to provide all relevant business and financial information, with the time taken to make a decision increasing for larger loan amounts.

Start Up Loans Company

Welsh businesses could also look at UK-wide organisations such as the Start Up Loans Company that aim to promote the growth and development of small businesses. As well as offering finance, many of these also give advice and mentoring to businesses just starting out. The Start Up Loans Company is a subsidiary of the government-owned British Business Bank, a broad organisation that provides funding for businesses through its subsidiaries and partners. The Start Up Loans application process normally requires businesses to provide a business plan, financial information, and other documents showing their personal ability to pay back the loan, with a decision normally being made after several weeks. If accepted, the typical repayment period is between 1 and 5 years with loan amounts ranging from £500 to £25,000.

Grants from UK, Welsh, and local organisations

Especially if you are a new business just starting out, it is worth doing research into what grants you may be eligible to apply for- from UK-wide, Welsh, and regional organisations. These are unlikely to be large enough to fund everything you want so you would probably need to provide your own funds too but, unlike loans, businesses won’t need to pay the grants back.

Competition for these grants is likely to be high and the application process lengthy, but the variety of options available may increase the chances of a business securing funding.

Grants tend to have certain criteria for offering funding, such as for businesses based in specific regions or businesses that operate in certain fields. There may also be terms that come with grants, saying that the money can only be used for rent, equipment, or other kinds of costs. To name just a few, some of the Welsh councils that can offer grants to certain local businesses include Swansea, Newport, Bridgend, Blaenau Gwent, and Caerphilly.

Blog by John Ellmore Know Your Money

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