In 2022, about 3.5 million businesses were actively operating in the UK. This figure increased to 5.6 million in 2023. Therefore, the increase of 2.1 million businesses in just one year is quite striking.

A current report reveals that 35.4% of the businesses have an age from 1 to 4 years.

The difference in number of new companies registering in 2022 and 2023 is 4.5%. With the growing number of start-ups or small businesses, the requirement for external Funding has also soared.

Different options have emerged to satisfy various necessities. However, you are not restricted to sticking to a particular option. You can even consider an unconventional choice, like benefit loans from a direct lender.

Wondering how that would work? Simple! Most people leave their jobs while starting a business. When they are go through the unemployment phase, they can seek government assistance as a benefits.

Now, based on that, you can get financial support from a private lender. Borrowing requires you to show some income stream. Benefits will fulfil this requirement, and you can quickly get short-term funding.

You can even opt for other financing opportunities. However, if you are living with benefits, you can take advantage of these loans without any second thought. Finances have been a critical necessity since the inception of the business.

Different occasions when external funding is crucial for any business

The difficulty level for fundraising increases when you are a new venture. The reasons could be that you do not have enough business history to exhibit and face tough competition. Nevertheless, some lenders resonate with your spirit and get ready to offer financial help.

Keeping the working capital intact should be your ultimate focus. However, you still cannot get 100% coverage for the financial needs of your business. Requirements may pop up all of a sudden.

Even an established venture would look for funds on various occasions. The different scenarios when your business would need money with some statistics.

Dig deeper to understand where and how your business might need funding. This will help you to prepare ahead of time. You will have a clear picture of the financial requirements to stay ahead of time.

• Taking on staff

Your business will grow with time. Thus, you will need a dedicated workforce to support you. This also means you have to pay them salaries as they will work for your business.

Oftentimes, you need to hire new employees because of the hike in seasonal demand. Once the season is over, the requirements will drop, and you will no longer require them. Here, taking on staff is an occasional requirement.

Maybe you are not prepared for it, but you cannot ignore it. External finances can come in handy in such scenarios. They help you to boost the workforce to increase supply till the season lasts.

• Expansion of business

With funds, you cannot utilise any upcoming growth opportunities for your business. You will need sufficient resources to help your venture scale up. At times, you may be required to purchase surplus raw materials to increase production.

If you do not produce more, you will not be able to complete the bulk order you might have received. Again, this depends on raw materials, and if these are not sufficient, production will be hampered. An instant infusion of cash can help you navigate this problem.

You can use the funding to buy raw materials and pace up production. When you are able to deliver expected results within the given timeline, your customer base will grow. This will help expand your business further.

• Penetrate new markets

Now, the time has come for you, as a small manufacturer, to explore other markets. This is not possible without funding assistance, and you will be competing with marketing stalwarts.

You will have to face additional expenses to manage your business in different markets. What if you are not ready with a financial plan? This unexpected scenario can motivate you to get a loan so that you can fulfil your current purpose.

If you fail to arrange funds, you will miss out on an opportunity. This will directly influence the future of your business.

• For marketing and advertisement

Once your business starts growing, you must focus on marketing it. Otherwise, reaching a wider audience will be difficult. You might have to spend money to increase your reach and create awareness among a suitable target audience.

Such expenses seem like an additional payout while you must keep up with usual business activities. If extracting funds from the business cash reserve is difficult, you can resort to the alternative option. External funds can help you handle the outgoings to make your brand popular.

This move can help you approach a large number of customers. Therefore, to boost the reach of your business, you should be shelling out money. External funding can very well come in handy in such situations.

• Tackle unplanned financial problems

A sudden cash crunch may pop up at any time. It could be an insignificant requirement, but avoiding it could be fatal for your business. The business revenue has just started generating.

You cannot take out money from it now. In this situation, getting external funding is correct as you can meet the urgent necessity. Once revenue starts growing, create a separate setup to save money for unexpected purposes.

When you have such an arrangement ready by your side, you do not have to depend on borrowing.

Aspects that should be at the back of your mind

When a small business seeks funding opportunity, they must have a checklist ready by their side. It will help them make sure about their chances of getting accepted.

• A solid business plan can help your venture go a long way. It acts like a vital document when the age of business is not considerable.
• Suitability of the financial condition of the business. If it cannot afford to pay back money on time, prevent borrowing or else it will impact negatively.
• Do not hesitate to seek advice from an expert. Maybe you will have to pay them some fees, but it will be worth it.
• Compare different funding options to choose the best. Sometimes, the most suitable option does not offer affordable rates.
• Prepare your pitch before meeting an investor or a potential loan provider. Remember all the positive points.

The bottom line

Your business might need funding at different times for different purposes. Borrowing can become difficult if your financial condition and that of your venture have some setbacks. In such conditions, you can consider opting for joint personal loans.

In this case, you will have a co-applicant in better financial condition. The two parameters that can define it are credit history and income. Both should be favorable, or else getting a breakthrough would be difficult. Thus, you can see different opportunities lying beside you. All you need is the right insight to understand which one will be perfect. You do not need to follow traditional borrowing methods.

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