There are countless options when it comes to funding, and these can be overwhelming and a little daunting to sift through. That’s why we’ve come up with this article to help you find the best option for your business, as well as the best way to initiate the funding process.
Where to start?
Make sure that you have really thought everything through, both in terms of your business and what you want from your funding. You need to make sure that you have a secure business structure and plan that you can approach your chosen scheme with.
Asking for help from an accounting firm can be a great idea, as they may have relations to those you will be working with. They can also assist in ensuring your proposal is up to scratch so that you can get the best match possible.
Trying local lenders (like your council) before approaching government schemes can be a good start, however if this isn’t successful, don’t give up hope! There are plenty of other ways to secure your funding.
Find your funding
The most common method of funding within new businesses is the ‘Small Business Loan’, which is essentially a bank loan which will be later paid back with interest. Compared to other options, the interest is rather low and involves no equity. Sounds great, right? Frustratingly, as this comes through a bank there are very strict requirements, and your business must be within a thriving industry.
Another option is the UK Government backed ‘Start Up Loan Scheme’. This scheme allows you to borrow anywhere between £500 to £25,000 in the form of an unsecured personal loan, so guarantors or supporting documents aren’t necessary. This scheme also involves 12 months of free mentoring to help get your business going. The only downside to this is that whether or not your business actually succeeds, you are liable to pay the loan back in full.
If you are looking for a quick-fix funding scheme, ‘Debt-Based Crowdfunding’ may be for you. This is a process involving multiple lenders who you will later pay back with interest. Open to any industry, this option is all-inclusive and great for those having issues in trying to secure a loan. However unlike many other options, debt-based crowdfunding does not offer support or mentoring and often involves much higher interest rates.
Willing to give up equity? It may be worth looking into the likes of angel investors. These can be a good option for start ups as the investor provides their experience and knowledge and could potentially fund a large sum of money. However, as you would be giving up equity you would therefore lose some control within your business.
The Prince’s Trust has a scheme for young entrepreneurs and their startups, offering a grant of up to £5,000. This also includes a business mentor, meaning you will have access to a wealth of knowledge and support. It may be the case that you are eligible for a business grant as well as this. You can look into their trust here.
There are many more options to explore when it comes to looking for suitable funding - one easy and accessible one being borrowing from those close to you. Taking a loan from friends and family means little to no interest and oftentimes you will find these people are very willing to help get you on your feet. The downside to this is that if your business fails and repayments can not be made, relationships could be at stake.
Ready, set, go!
Now that you know more about some of the funding schemes available to you and how you can approach these - it is time for you to get planning! While you will be very eager to get your business going, finding your funding should not be something that you rush. Being clear about your business direction and exactly what help you need to get where you want to be is essential to finding the most suitable option. Don’t be afraid to ask for help, as we have said accountants can be brilliant aids in this process.
Stay tuned for more tips to help you with your small business.