5.1 Financing your business

Every business needs financial resources to operate. However, entrepreneurs also need more than money; their business models depend on access to networks, knowledge and people.

HSBC research ‘The business of recovery’ (2009) indicated that the entrepreneurial and small business sectors had found new flexible ways of working and will not return to more rigid, arguably more expensive, forms of business in the future. These sectors are using technology and advisers to build social networks and human capital, as well as finance.

At the time of writing (Summer 2013) there is a pressure on the private sector and in particular the entrepreneurial and small business sector – as the ‘backbone’ of UK industry – to lead the economy out of recession. Alongside this we also see the ‘shrinking of the state’, often a significant part of the rural economy, and the emergence of alternative enterprise models such as third sector and social enterprises.

However, funding is tight. The recession and a credit crunch mean that these are potentially difficult times to secure finance from the private sector. Government cuts mean there is increasing competition for public sector funding or contracts. If you are to realise expectations then you need the right support, finance and advice.

Access to finance is often a barrier for business. For example the Scottish Federation of Small Businesses’ figures for the first quarter of 2013 show that while credit became cheaper at the start of 2013 the 12 month trend for the number of successful credit application was down.

The Bank of England’s regular credit conditions survey [Tip: hold Ctrl and click a link to open it in a new tab. (Hide tip)] covers household and small business lending. A visit to your local bank, or asking other local business people where they have sourced finance may be just as useful.