Business loan or private capital raise: which is the best finance option for SMEs?  


Business 3 years ago
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Cash is critical to business growth, and companies need clear access to finance to support their development. Yet cash flow remains the number one reason small businesses fail, and only 4 in 10 SMEs apply for external funding – why?

One major challenge is the number of finance options available to start-up and scale-up businesses. Company leaders don’t want to ‘back the wrong horse’ and get trapped in an inappropriate financial agreement, when there are more flexible funding opportunities available.

To help SMEs choose the most appropriate funding route, WeOwn looks at two popular options available through our business finance platform: peer-to-peer loans and private capital raises.

Debt financing: why do SMEs take out a business loan?

There are three main reasons that SMEs find business loans a more attractive prospect than private capital raises. These are:

Retaining equity – lenders make money on the interest payments from loan agreements, so there’s no need to give away business capital in order to secure finance.

Quick cash boost – the online loan application process is very quick, providing rapid access to finance. The amount borrowed can also be repaid relatively quickly, making business loans a good short-term funding option.

Low borrowing threshold – because of the straightforward process and short-term agreement, it’s often cheaper to borrow small amounts of money than run an investment round. Businesses loans on the WeOwn platform start at €20,000.

  • Financing
  • Loans
  • Private capital
  • Business development
  • Capital raise