Which funding factors matter for your small business?

As a small business owner or startup entrepreneur in the UK you’ve most likely considered applying for funding/financing at one point. This means that you probably heard the term “funding factors”. 

If not; funding factors are what determine whether you and your small business are eligible to get funding/financing.

Simplifying the meaning of funding factors; funding factors are simply rules or the qualification criteria that must be met before a bank, a private investor or a government funding agency says “yes” to approving funding/financing for your small business.

Why funding factors?

Think of it like this: If you are a bank providing mortgages and have no “eligibility criteria” which have to be met in order to provide somebody with a mortgage to buy a £1,000,000 house. How would that work for your bank? You would probably get a ton of customers signing up for mortgages, but long term; giving a mortgage to somebody who doesn’t have the ability to pay the minimum payments, or maybe is unemployed – the mortgage would be lost and the bank would lose.

So it sort of makes sense for big institutions to protect themselves and provide the financing or funding to only those who need it; who can benefit from it; who can show success and of course those that meet the criteria.

When it comes to funding factors to getting a business funded, the same logic applies.

Government funding agencies for example have funding factors which have to be met by business owners in order to do a few things actually; 1) to ensure that only those who have a chance of succeeding to get it and 2) to ensure that the best candidates get the help.

So what are the main funding factors that matter when applying for your small business?

It is important to note that most sources of funding such as banks, private investors or government agencies have their own unique criteria or funding factors that have to be met. At times, every single source of funding may have their own funding factors.

The general funding factors to consider include:

• Do you have a business plan?
• Where is your small business located?
• What is the purpose of the funding?
• What industry is your business in?
• Time of the year you apply

These 5 factors are the most general that the majority of funding sources look at in order to determine eligibility to funding. As mentioned, on top of these general funding factors there may be additional factors that vary from source to source.

Your business plan can help a funding agency determine if they would want to invest into your business and you.

Your business location can help determine which funding schemes or agencies are available to help provide the funding. Certain schemes/agencies/investors only provide funding in specific areas.

The funding purpose is important as it helps determine what you need funding for which ultimately helps figure who (scheme/agency/investor) is available to provide the funding. Remember that not all funding sources fund every single funding need.

Your industry is important as it determines again the same; which funding source will be available to provide you with the funding. Keep in mind that there are many sources for each industry and as an example; a funding agency that helps only tech sector businesses doesn’t provide funding for those in the agriculture industry – and vice versa. Thus knowing your industry and searching for funding based on that and a number of other factors will help.

Time of the year that you apply for funding is also critical as it helps determine when the “slow and busy season” is for applying. Sometimes the best time of the year is at the start of the year which other times are at the end. This really depends on the scheme, or the investor you applying to. It is important to know the scheme provideadlines as some government funding schemes only provide funding up to a certain time of the year.

Following these general funding factors will only get you so far but it will give you a better idea of how your small business can get funding. To get a step further, learning more about the funding source will help you determine the additional funding factors.