If you’ve got the idea and the groundwork sorted, you’re halfway there to creating your start-up. However, you still need funding. Don’t let this stop you launching your business, instead learn about the ways you can get financial help.
Here are six ways you can secure finance for your business, and how to secure them.
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Get a business loan
The obvious source to finance a business, a business loan is a lump sum of money borrowed from a financial organisation. You will have to pay it back along with interest, but you won’t have to give up any equity.
Be prepared to undergo credit checks and to be asked for a detailed business plan by the lender. Research the difference between secured and unsecured loans and think about how you will be able to pay it back. In short, unsecured loans don’t require you to have assets in hand if you can’t keep up with repaying the loan, while secured loans do.
You can look for business loans from banks, building societies, government backed firms, government initiatives and peer-to-peer lending platforms such as Funding Circle.
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Consider a small business grant
These are very competitive and are essentially cash awards given to entrepreneurs and new businesses. You won’t necessarily have to pay interest on small business grants, and sometimes won’t have to pay them back at all.
They are offered by local authorities, universities, some charitable organisations, the European Commission and the government. They’re most often handed out to organisations that are working to improve other people’s lives in some way.
Grants like this are extremely sought after and therefore difficult to obtain. They have strict criteria in terms of eligibility and there are many factors to consider, including the purpose of your start-up, its size, age and where it’s based.
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Look into invoice factoring or financing
These are fast ways to inject cash into your business while you’re waiting for customers to pay. They’re similar processes that operate in different ways:
- Invoice factoring
This means selling unpaid invoices to a financial company. Within around 48 hours the company pays you a portion of the money owed on the invoice. This is called a cash advance. They will then collect payment from the client and pay you the reserve (the remaining money) minus commission fees.
- Invoice financing
This means borrowing money against your unpaid invoices from a financial company. You receive it as a cash advance and when your client pays their bill, you pay the money back.
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Consider crowdfunding
An ever-popular way of financing businesses, crowdfunding means posting your pitch online and encouraging members of the public to pledge funds. Backers can invest very little so it’s a good way to attract thousands of small investors and is also a great way to secure brand ambassadors and market your business. There are two different types:
- Rewards-based crowdfunding – where businesses offer rewards in the form of discounted pre-orders, invitations to launches or freebies in return for a pledge. Have a look at Indiegogo and Kickstarter.
- Equity crowdfunding – this offers investors an equal share of a stake in your company’s equity. See platforms such as Crowdcube and Seedrs.
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Secure an angel investor
These are high-net worth individuals who can front up capital early on in a company’s lifespan. They usually have many year’s business experience and will want ROI in the form of equity. Many also act as mentors, helping to propel a start-up to success by using their connections and experience, as well as funding. You have to be proactive to find one, as they’re unlikely to see your business from afar.
Try networking in real life and on platforms like LinkedIn, prepare an elevator pitch for moments when it may come in handy, ask other business owners to introduce you to key people and look into angel syndicates. They run pitching events and may be able to help.
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Go your own way
It’s difficult to secure business funding and if you can’t find it, you could try bootstrapping your business. This means a start-up with no external funding, where the founder uses their personal finances and reinvests revenue into growth.
If you choose to bootstrap, then you must remain as lean as possible. There will be no opportunity to splurge on office space or a team of people straight away. Focusing on what can be achieved with limited funds is a good way to start. For example, running social media campaigns, using freelancers and contractors and renting any equipment or premises, rather than buying.
For more financial advice on your start-up, contact the team at Turner Little.
About Turner Little
Founded in 1998 in Yorkshire, UK, Turner Little is a specialist UK and offshore company formation, banking and corporate services provider. Our services include company formation, UK and offshore banking, asset protection, credit correction/repair, trademarking and trusts. Other services include Internet services, mail forwarding, wills and probate. Turner Little’s vision is to offer the best possible service, together with market leading products.
