Starting any new business requires finance of varying levels. If you’ve got this far then you probably already have a business plan and a good working idea of how much money you need to get started. The question is do you know how you’re going to get your hands on that money? There might be more avenues open to you than you think.
- The obvious ones:
There are a number of ways of raising finance that you might have already given thought to. This includes raiding your savings, maxing out the credit cards, borrowing from friends and family or perhaps even cashing in early on your pension. Each has its own merits and pitfalls. The most obvious being the flexibility, the limit you can borrow this way and the dangers of getting out of your depth with loved ones.
- Bank Loans:
The next most common choice for finance, bank loans can be taken out over long or short periods with varying interest rates; these are perfect for funding purchase of assets, with a price tag of less than £500,000. Of course, banks require security or a guarantee and these loans can present a cash flow burden.
- Business Grants:
Grants can be obtained for business growth from the government, the European Union and local authorities. However, in most cases, grant funding comes with strict and specific criteria. There will also be strong competition for their award, which can provide a significant hurdle for most businesses.
This is a financial transaction where a company sells its invoices to another business at a discount. This other business then seeks payment of these invoices from the debtor. Factoring allows swift acquisition of finance which can be used to fund business growth. The obvious downside being the loss of value of the initial invoice.
Finance may be acquired by seeking investment from a venture capitalist. This sort of investment can take up to 6 months, but allows you to benefit from a wealth of experience and potentially up to £2 million finance.
- Business Angels:
Similar to venture capitalists, business angels are wealthy people seeking to invest in growing businesses. They usually have less money to invest, but can do so more quickly and also provide skills and experience to the aspiring entrepreneur. The downside here is they may want a say in how your business is run.
- Solutions for Business:
“Publicly funded business support products and services designed to help businesses start, grow and succeed.”
Government funded support for new businesses which provides help in a number of areas. For example, providing finance where banks have refused to or providing a guarantee where a business has none. These are available through Business Link.
- Small Business Research Initiative (SBRI):
Funding is provided here for specific products which could help government or public sector problems. Not a grant, but a fully-funded contract between the business and the government which can lead to a 2 year contract and £1 million investment.
The FSB provides its members with access to discounted loans, financial advice and more. With all areas of commercial finance covered. Membership of the FSB is a necessary requirement.
- Selling shares:
Going “Public” and selling shares of your company on the stock market is another way for a business to make money. It’s only open to Public Limited Companies and it does mean that you reduce control of your business, but for some it is a viable option to raise finance.