Need to raise funds to get your promising enterprise off the ground? Read five ways you can finance your business start-up.
Finding ways to finance your business, especially in its early stages, can be a mammoth task for even the most talented entrepreneur. But it’s also a vital one.
One of the first steps towards making your business a success is establishing a grounded financial base – not only can it help you to get it off the ground in the first place, but it gives you a pool of funds to help you make the right decisions to keep it growing at a healthy rate.
Five ways to finance your business start-up
So where do you find the money to start your business? There are a variety of funding options available to start-up entrepreneurs. Business writer Patrick Vernon explores five of the most popular.
1) Take out a loan
Loans are usually the first source thing that comes to mind when considering a financial solution. And there are plenty of different types of loan to choose from – from a traditional high street bank loan or schemes such as Virgin Startup (who provide mentoring and other really helpful support as well as finance), to more creative ways of borrowing such as a logbook loan from companies like CarCashPoint.
A logbook loan will be secured on your vehicle, which technically means that the lending company will own it until you can pay back the loan (you will still be able to drive your car as usual). Creative loan ideas such as this can be particularly useful to new business owners as they’re usually fast and reliable.
2) Apply for a government grant
There are a number of government schemes and grants designed to help you fund a start-up business. However, these are highly sought-after and are often only available to specific groups or industries.
Don’t let this stop you from applying for a government scheme though – someone has to get them! And the great thing about securing a grant is that you won’t have to pay back it back, so you won’t end up in debt or have any extra financial burdens lingering after your business has started up.
3) Borrow from friends and family
Before you around for help with your business, assess your own current financial situation and determine how much of your own money you will be able to put into your business.
If you’re short of your target, approach close friends and family members and explain your business plan so they can see how serious you are about it, and make their own decisions about its potential.
Try not to put people in a difficult position. And if they do choose to invest in your business, make sure that they get their money’s worth out of it and keep them involved with the process.
4) Sell shares
According to Gov.uk, if your business is in need of investment you may be able to raise money by selling shares in your company.
Sources of ‘equity funding’ are said to be of some help with this matter. Gov.uk suggests that you try approaching wealthy individuals (such as a venture capitalist) who often invest in start-up businesses or turn to a crowd-funding platform such as female entrepreneur specialists f-crowd.
Before you sell any shares of your business however, it’s a good idea to seek legal advice.
5) Get a guarantee
If you are still struggling to secure financial aid, it may be worth checking to see if you are eligible for any grants or guarantees. According to The Start Up Donut, many start up business owners may be eligible for the Enterprise Finance Guarantee (EFG) in which the government ‘guarantees to repay the lender 75% of the value of the loan if you default’.
This is a loan of between £1,000 and £1,000,000 that is usually available to start-up businesses that are unable to provide enough security.
Need help to secure finance?
If you’re going to convince someone to invest in your business, you’ll need to be able to demonstrate it’s a viable enterprise. And that usually means preparing a rock-solid business plan.
You’ll find lots of helpful advice on writing a professional business plan (plus tips on mistakes to avoid when starting a business!) in these articles:
- How to write a business plan.
- 10 common business plan mistakes to avoid.
- The first 10 steps to take when starting a business.
- Five reasons why mums’ businesses fail (and how to ensure yours doesn’t).
- 10 things you should never to do when starting a business.
- Seven reasons your new business will fail.