Starting your own business can be a daunting process. You’ve got the idea, or the early concept, and you know the direction you want to take, but there’s one question stuck at the back of your mind: “How do I find the money to start my new business?”
This is often the conundrum which holds entrepreneurs back, and it’s increasingly becoming a challenge for start-ups to find the finances, often because there are many more businesses vying for that ever-popular funding.
We also find that start-up owners have this misconception that they need to raise huge chunks of money up-front in order for their idea to move forward, which is simply not true. We’ve written this blog to let you know about a few great funding options that you can consider for your start-up.
1. Loans and grants
Start-up loans tend to be a popular way of raising finance for a new business venture. These loans are available to businesses that have been trading for two years or less, and can be any one-off amount up to £25,000. However, it is worth remembering that these may only be used for business purposes and are repayable at a fixed interest rate of 6% per year.
If you want to keep things simple, you can also consider loans from your family, as they can often provide a fair and reliable source of funding if they have the money to spare. You’ll often find that your relatives are more likely to trust you with the money borrowed in comparison to an outsider. This also means you won’t necessarily have to pay interest on the loan.
An alternative to a loan would be a government grant. Currently, the government has a portion of taxpayers’ money that is put towards funding new business ideas, which is distributed across national and local organisations that you can then apply to. The only downside here is that there is no guarantee of receiving the grants, as there are rigorous checks to see if you are eligible for this funding.
Crowdfunding can be a hugely successful way of raising money for your start-up venture. It’s increasingly becoming more mainstream, with businesses such as Oculus Rift VR and more being funded through crowdfunding campaigns!
The concept of crowdfunding has also rapidly changed. Nowadays, entrepreneurs have utilised it to build their audience, launch new products, or grow and scale a business. One example of these changes is the ability to choose different types of crowdfunding; the options being donation, equity and debt. The most popular option is donation crowdfunding, where people can donate their money to your venture. This option means they want nothing in return, as they’re donating to show that they believe in what you’re doing.
Equity crowdfunding still gives people the option of investing in your company, but only in exchange for shares or a stake in your business. Debt crowdfunding offers the most risk, as this is where people effectively lend the money expecting to receive it back with interest. This could put you at risk if your business venture doesn’t work out, leaving you with more debts to pay off.
3. Angel Investments
An angel investment is a great opportunity for you to have investors take a share of the business. In this instance, an investor would use their own personal finances to provide equity into the business.
The advantage here would be them taking an active role in the business, as this would be their way of making sure the venture yielded a strong return on their investment. This would also give you the opportunity to learn from their knowledge and experience.
4. Funding it yourself
Sometimes, entrepreneurs forget that, these days, the costs of starting a business are at an all-time low. For example, some business ideas can be run from the comforts of your own home, and require nothing more than an internet connection, which is why a lot of start-ups are actually self-funded.
Yes, it may take longer for you to save the money before you the start the business and start growing organically, but consider the advantage: You wouldn’t have to give up any equity or control.
Don’t panic! We’re here to help
The important thing to remember when looking to fund your start-up is that mistakes are inevitable. Not every idea you try will work for you, but you can always learn from them and move on. Ultimately, you need to believe in your ideas and keep your motivation levels high, because you are the key to your start-up and without you, there is no way for the idea to progress.
We often have start-up businesses coming to us for support, and if you’re committed to success, talk to us about your vision, your goals and your long-term objectives. This is your opportunity to get the help needed for your ideas so you can to turn them into a reality. Visit our website for more information or drop us an email to start taking action towards making your business happen.