Setting up a new business isn’t easy or cheap. There is a cost incurred for everything, from registering your business to finding premises for your business and promoting yourself. So what finance options are available to you?
Another way to raise money for your business is through investment from an Angel Investor. This is where a person can buy a stake in your business in return for funding and, hopefully, a return on that investment in the future.
How much money you could get for your business will depend on the investor and how much equity you are willing to sacrifice. The current value and potential value of your business in the future is another significant factor
You will need to present a strong case for growth and a low risk opportunity for your potential investor. Ideally you will already have had some success as this also reduces the risk of an investor losing their money. It isn’t always easy to secure investment; you may have too many competitors or you may have limited growth potential. If so, there are other options to consider…
Many banks offer small business loans, often extending these to start-ups to help get them off the ground. These loans can often be repaid simply, with repayments tied to transactions or as a direct debit each month.
However, with bank lending figures continuing to fall, thousands of entrepreneurs are looking for alternative sources of funding to get their business off the ground.
The government provides new businesses with access to start-up funding. Start-up loans range from £500 to £25,000 and can help a business get established, covering the initial costs of purchasing equipment and getting ready to begin trading.
Another government option are start-up grants, which are non-repayable lump sums made available to businesses. These grants have to be applied for, so it isn’t guaranteed that a business will receive the funding they can provide.
There are many grants to choose from, ranging from schemes to help encourage businesses to take on apprentices or fund training to helping with building repair or promoting growth. The government website contains a list of the different grants available to businesses. However, it is important to note that many grants are limited by a business’s size, sector or location.
Websites like GoFundMe or Kickstarter allow members of the public to donate or ‘back’ a project, in return for early access or specialised rewards for backers.
You should explain what the funding will cover – a new product or service, or getting a product into mass production, for example.
It’s important to note that if a crowdfunding event doesn’t reach its goal, such as raising a set amount of money in a month, you will receive none of the funding. So only consider as an option if you feel confident that your project will create enough engagement to complete what you want to achieve.