The coronavirus pandemic has impacted everyone in some shape or form, but specifically businesses. The national lockdown of over three months has led some businesses into administration and some businesses into extreme turmoil without any hope of survival. This paper will seek to provide an in-depth analysis of how businesses can tackle a severe lack of cash-flow.


Rather than attempting to find capital from external sources, founders of their own business may use their own money and income to bolster the business, concentrating on functioning at the lowest possible cost. There are advantages to this type of movement, it avoids the process of seeking to find investors and in addition, allows you to maintain full control of the company. Further, it forces you to get creative with your money and how best to use it, which can certainly lead to a strong, lean and efficient business. However, as your own capital is being used, you may incur a substantial financial risk if the business fails. It is therefore a high-risk venture, especially in the current climate.


Crowdfunding is an innovative method of raising capital with the help of contributions. These contributions can be made through individual investors, clients, friends and family through social media or crowdfunding platforms. The crowdfunding method allows businesses to gather the sufficient funding needed to implement their business idea successfully. The crowdfunding platform enables individuals to develop, present and share their pitch on a single online platform.

There are four main categories of Crowdfunding: Donation-Based, Reward-Based, Debt-Based and Equity-Based.

Rewards-Based Crowdfunding

This type of funding allows individuals to contribute money to projects in exchange for a reward or product, usually a card to a produced version of the crowdfunded product. This type of Crowdfunding allows an engaged network of supporters who have gained rewards through your campaign and therefore, increased exposure to a broad online audience. Further, a campaign results in a rich market research resource as you develop products, concepts and strategies. Thus, entrepreneurs gain more confidence over their business idea by getting a response as soon as the product is revealed for fundraising. However, you may face challenges when shipping the contributors their promised gifts, as whilst you may have reached your aspired capital target, it may not be definitive to suggest that this will have stopped your cash flow issues.

Donation-based Crowdfunding

This type of fundraising is suitable to raise money for a project with no financial or material return. It is most commonly used to support a charitable purpose or to sponsor an individual. This type of Crowdfunding allows increased exposure to a broad online audience, potentially motivating new supporters who would not have donated otherwise. Crowdfunding for charitable purposes provides donors with transparency around where their donations and investments are going, in the hope of making a real impact. Further, the Crowdfunding model results in improved marketing and raising public awareness for the cause. However, there is a risk that donation-based Crowdfunding might replace Government funding as it encourages public sector funders to retract from funding services that should be paid for by taxpayers.

People are now utilizing popular crowdfunding platforms like GoFundMe and Crowdrise to help raise funds for their social causes.

Debt Crowdfunding

Unlike rewards-based or equity crowdfunding, debt crowd funders do not expect any reward or ownership in the company. The process is similar to that of acquiring a loan, the lenders expect a principal with interest in exchange for their financial assistance. Debt crowdfunding allows you to take multiple small loans from an array of different people, thus, the availability of a large pool of interested investors on a single platform automatically increases the changes of acquiring the funding easily and quickly. However, like many loans, you will have to bear the stress of paying it back.

Equity Crowdfunding

Gathering funds through equity crowdfunding allows individuals to gain the required amount of funding from investors. The funding is at the cost of giving up a percentage of ownership (equity) in the company. Unlike donation or reward-based crowdfunding, it helps gather enough financial capital to help a business launch itself, in addition, it ensures that there is a joint single investor, rather than dealing with every investor separately. However, one of the most significant drawbacks of equity crowdfunding is giving up a percentage of ownership for financial funding. This can have a considerable impact on your company’s decision making process in the future.

Available Crowdfunding platforms include KICKSTARTER, INDIEGOGO, Crowdfunder and GoFundMe.

Applying for a Loan

Two schemes that many businesses have utilized during the pandemic to raise immediate capital is the Bounce Bank Loan scheme and the Coronavirus Business Interruption Loan Scheme.

The Bounce Back Loan Scheme is a demand-led scheme offering lending that targets small and micro businesses, providing loans from £2,000 up to 25% of the businesses’ turnover with a maximum loan of £50,000. The Bounce Back Loan Scheme enables businesses to obtain a six-year term loan at a government set interest rate of 2.5% a year. The Government will cover interest payable in the first year. To be eligible for this loan: your business must be based in the United Kingdom, your business must have been established before 1 March 2020 and the business must have been adversely impacted by the pandemic.

The Coronavirus Business Interruption Loan Scheme is a demand-led scheme offering lending to small and medium-sized businesses with a turnover of up to £45 million. Invoice finance and asset finance facilities are available from £1,000 to £5 million, whilst term loans and revolving credit facilities are available from £50,000 to £5 million. The government guarantees 80% of the finance to the lender and pays interest and any fees for the first 12 months. To be eligible for this loan, the business must be based in the United Kingdom and additionally, you must show that your business would be viable were it not for the pandemic and that it has been adversely impacted by the coronavirus. To borrow £30,000 or more,

This is an extremely difficult time for business owners and therefore, it has never been so important to make a decision that will enable the business to stay afloat, but most importantly, allow the business to prosper once again in the future.

At Audley Chaucer, we have extensive experience dealing with all types of businesses and can provide expertise as to the most suitable method going forwards for your business. If you would like further information on how to raise capital for your business, please contact John Szepietowski at Audley Chaucer.

Joseph Beams

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