One of the most important factors which affect the growth of your SME’s is the investment power funneled into it. Trying to secure these funds can be a tricky process, and requires planning to ensure you have a convincing business proposition to sell to your potential investors. Before reaching that step, it is important to understand which type of investment best suits your business and its needs. 

 Types of funding available for your SME

1. Family Loans

Finally, another source of investment is getting family and/or friends loans. It is the easiest method of getting finance for your SME and provides your family with shares of your company, keeping ownership within your family circle and providing you with reliability on their advice.

Deamer, L (2002) explains that families invest more in startups and small businesses the most, making up 38% of all investments. However the main negative factor is if the business fails, these close relationships could be hindered. 

Secure funding can be difficult to obtain but there are a plethora of options available for various types of startups and the industry your SME is based in. Taking the risk with funding is an essential step to take as your SME grows, and the variety of options can ensure that with the proper research, the most efficient options can be singled out according to the business type, industry and need. 

2. Bank Loans

Being one of the most common forms of investment options, bank loans provide an array of pros for a majority of SME owners. They often require real estate or other forms of assets to help secure collateral when lending. Sometimes the business owner can settle on a personal guarantee but this means they would personally be responsible for debt should the loan be unpaid. 

Despite this, a bank loan provides the following positive attributes for business owners such as, 

1. Slightly lower interest rates when compared to other investment options
2. Availability of funds
3. Fast approval of funds
4. Business loans are not taxable income

Some of the disadvantages of business loans are,

1. Most small-to-medium businesses (SMEs) are ineligible for bank loans as banks tend to favour equity secured loans. Loans lent without security are often of smaller value.
2. Additionally, banks tend to favour current customers with a good credit history and profitability. This makes it competitive for new SMEs to obtain loans. 

3. Angel Investors

Angel investors are individuals who invest their own money in early-stage, high-growth companies. They typically provide funding in exchange for an equity stake in the company, and take an active role in mentoring and supporting the companies they invest in.

Angel investors are typically wealthy individuals who have made their money through their own business ventures. They are often passionate about innovation and entrepreneurship, and they see angel investing as a way to support new businesses and help them grow.

Some of the benefits of angel investors are:

1. Funding: Angel investors can provide startups with the capital they need to get off the ground and grow their business.
2. Mentorship: Angel investors can provide startups with valuable mentorship and advice. They can help entrepreneurs develop their business plans, make strategic decisions, and navigate the challenges of running a business.
3. Access to networks: Angel investors often have extensive networks of contacts in the business world. They can help startups make connections with potential customers, partners, and investors.

Angel investors are not right for every startup. They typically invest in companies that have the potential to generate significant returns on their investment, and they are often willing to take on more risk than traditional lenders. 

4. Venture Capitalists

Venture capitalists (VCs) are a type of business investor who provides capital to early-stage, high-growth companies. They typically invest in companies that have the potential to generate significant returns on their investment and are often willing to take on more risk than traditional lenders. They typically provide funding in exchange for an equity stake in the company.

They assess the company’s management team, business model, and financial projections and usually provide funding in the form of equity financing. This is, purchasing a percentage of the company’s stock in exchange for their investment.

Venture Capitalists often get involved in the management of the companies that they invest in. By providing guidance and support to the management team, they help to make strategic decisions. This also means they have the right to appoint board members to the company’s board of directors as well.

Some of the benefits of venture capitalists are given below:

1. They provide a larger sum of investment at the early stages of companies. 
2. They have experience in the process of startups and can be valuable in the guidance they provide for a small-to-medium enterprises (SMEs)
3. Venture capitalists have a lot of networks in many industries, further adding to the value of knowledge and resources they bring to an SME apart from their investment capital. 

Some of the disadvantages of venture capitalists include;

1. The venture capitalists requirement for equity in the company means SMEs must risk a certain amount of ownership of the company. This level of ownership may increase depending on how the business operates and the terms and conditions settled on. 
2. Founders may lose control over their decision making as venture capitalists could have a larger say in decision making situations.
3. The pressure to perform well is high for companies as their performance is monitored by the venture capitalist. 

The main difference between angel investors and venture capitalists is that angel investors are individuals who lend their own money to start ups whereas venture capitalists are business invest money into startups on behalf of a risk capital company

5. Grants

Grants are provided by government agencies, foundations, or non-profit organizations. They are often given to businesses that are working on innovative or socially responsible projects and are a type of funding that does not need to be repaid. 

The criteria for grants vary according to the grantor and can be location or state specific. Grants are difficult to gain due to their benefits and therefore are competitive to get. Grants can provide businesses with a significant amount of funding, which can be used to cover a variety of expenses, such as research and development, marketing, and expansion.

Here are some of the benefits of grants:

1. They do not need to be repaid
2. They can provide a significant amount of funding
3. They can be used to cover a variety of expenses
4. They can help businesses to grow and succeed

Due to the competitiveness of obtaining grants, here are a few notes to follow when trying to apply for grants. 

1. Research and find grants that your business is eligible for
2. Start the application process early
3. Write a strong application that clearly demonstrates the value of your project
4. Be prepared to answer questions about your project and your business

6. Crowdfunding

Crowdfunding is a way for entrepreneurs and other individuals to raise money by asking for small contributions from a large number of people, typically via the Internet. It is a form of alternative finance that does not involve going through traditional financial institutions like banks.

Crowdfunding can be used to fund a wide variety of projects, including creative projects, business ventures, and charitable causes. The amount of money that can be raised through crowdfunding varies widely, from a few hundred dollars to millions of dollars.

Crowdfunding is conducted on a few platforms such as GoFundMe, Indiegogo, Kickstarter, Chuffed, Fundable and  Start Engine

Some of the benefits of crowdfunding include;

1. Allowing entrepreneurs and other individuals to raise money without having to go through traditional financial institutions.
2. Raise awareness of a project or cause.
3. Provides entrepreneurs with valuable feedback on their product or service.

However, there are also some risks associated with crowdfunding, including:

1. The possibility that the project will not be funded.
2. The possibility is that the project will not be completed as promised.
3. The possibility is that the entrepreneur will not be able to repay the funds.

Here are some tips for successful crowdfunding:

1. Choose the right platform for your project.
2. Set a realistic funding goal.
3. Create a compelling campaign page.
4. Promote your campaign widely.
5. Be prepared to answer questions and provide updates to your backers.