It takes money to make money. Everything retail needs a little cash to get going. From renting space, to buying stock, to manning your shop Everything you need to do to get started and make sales takes a little money to get going in the first place. If you want a little cash to kick-start your business or to help you realise your shop’s full potential, there are three main avenues you can go down: investment, grants and loans.

So, What’s the Difference?

Well all three involve raising funds for your business. All three bring those funds in from an external source. But in terms of how they work, what’s expected of you and what your beneficiary gets out of it, they’re all different.

Direct investment involves receiving the money you need to grow, in return for a stake in your business. This money is coming from people or organisations that see the potential in your business. You don’t need to pitch investors on what your business is so much as what it’s going to be. You’ll get the money you need for your shop. Your investors get a say in your business and the possibility of a return on their investment.

Grants, on the other hand, are usually issued by a company or organization that wants to support certain kinds of business. They’ll usually come with certain prerequisites. A particular grant will be for a particular sector, or for companies of a certain size or turnover. One of the great things about grants is that, so long as you meet the requirements, there aren’t usually any further strings attached and you won’t normally have to pay any money back further down the line.

Meanwhile, loans are a source of capital that we’re all probably a little more familiar with. They’re a pretty easy concept to understand. You receive a certain amount of money that you must pay back, at a certain rate of interest. Loans will often have prerequisites as well. However, they’ll usually be less about what sort of business you are and more about your likelihood of paying the loan back.

Working out which of investment, grants or loans are right for your business, photo by rawpixel on unsplash.com

So, Which is Right for Independent Retailers?

At the end of the day, all three of these are viable options for independents. Grants are a great source of money, without any meddling investors or draconian interest rates. But, as with all good things, they’re in rather high demand and applying for a dream grant can be a bit like playing the lottery.

Loans, on the other hand, are very reliable. There are plenty of places to get a business loan and while they may come with labyrinthine terms and contracts, the details are all there for you to see.

Investment is another beast altogether. It’s hard to recommend whether a shop should seek investment or not, because it’s so variable. Some investors are just looking to have a hand in helping an independent shop grow. Other investors want a hard, by-the-numbers return on investment. Some investors will let you do your thing the way you want. Others will want a direct hand in the running of your business. There can be hidden benefits to investment, like finding an investor that’s worked in your field who can help with mentoring your employees or put you in touch with others in the industry. There can also be unexpected problems when an investor relationship turns sour.

Bear these differences in mind when making your decision on which funding path you want to take. But also remember that all three are viable solutions and all three have their pros and cons. No two independent shops are the same and so no two independent shops will have the same experience of loans, grants, or investment. You need to weigh your options and do what’s best for you and your shop.