If you are a future-to-be entrepreneur, the chances are that your biggest concern in getting started is how to finance your venture. For the smaller of businesses there is a greater tendency to worry about how to find viable sources that will offer them finance or fund part of their business, given its relatively new status and smaller size.
For the bigger companies who have been trading for some time, finance is not normally considered a worry. Yet, even those bigger of companies had to start from somewhere – and you can guarantee that even they had a few trying times whilst trying to initially secure finance for their business ventures in the very beginning!
So, where do you even begin to look when first starting out?
A Bank Loan
Whilst the most obvious of choices for financing businesses, most smaller businesses don’t always feel that they have the credentials to approach a bank for a loan. However, many high street banks encourage the smaller business or entrepreneur, backing the smaller business community, provided they have a viable business plan in place.
It is always worth enquiring about your eligibility for a bank loan before you write this option off, merely because it can provide a good-sized amount of cash upfront for your business. The only drawback is that you will most likely be asked to provide a personal guarantee, meaning if you fail to keep up with payments you could for instance risk losing your home or other private assets.
A Start Up Loan
This Government backed initiative has been created to help those businesses who may not be able to immediately access other forms of finances due to just staring out in the business world.
A start-up loan currently allows you to apply for an amount of up to £25,000, with a small fixed interest repayable, through the British Business Bank. You can also access its additional services such as free mentoring, relevant business offers to help you begin your journey, plus business plan and cash flow forecast instant advice. With a cash injection right at the beginning of your venture, alongside such beneficial help and advice throughout, the guidance with such start up loans is a great way to begin your new venture.
A Small Business Grant
For those who haven’t heard of such grants, there are many of these schemes currently running in the UK for all types of small businesses. The only problem some people experience with these is when they try to find them!
There are three types of small business grants including:
Local Business Grants: Although every project is considered, and no sector is excluded, Local Business Grants tend to focus primarily on location, size and industry when judging the suitability of candidates.
Government Business Grants: These business grants are available from all major Governments including that of the UK, Scotland’s Parliament and both the Welsh and the Northern Ireland Assemblies. Funding is based on specific criteria and by meeting certain objectives, but there are many bodies to apply to.
European Business Grants: The European Commission distributes many funds for all business sizes, with several more specific grant schemes further available.
Crowdfunding – Equity or Product
A more recent way of obtaining money for business ventures, and start-ups especially, is through crowdfunding – which is the act of raising money, usually online, by asking people to donate to fund your project or venture.
A more popular way to fund for those in the creative arts sector, crowdfunding has had a good press in recent months. However, this method relies totally on an extremely visible social media campaign, so you need to be prepared to sell your business idea as much as you possibly can to drum up some interest and get people parting with their cash!
The downside to crowdfunding is when you allow people to invest in your company in return for several shares, or even a small stake in your business. Think hard about the possible outcome of having hundreds, possibly even thousands of potential shareholders in your business if you go down this route.
Family, Friends or Acquaintance Loans
If dealt with carefully from the very beginning, turning to those closet to you, who you know to have the funds, can often be one of the more easier and quicker methods of financing the beginning of your smaller business venture.
The key to lending from such people is to have a contract written up at the very beginning so everyone is clear on the amount, repayment terms and possible scenarios should you run into difficulty paying the money back. There is no reason why, when handled effectively, that such a loan in this way cannot be treated just as a usual business loan would be. Though it may need careful consideration on both parts, it is a good financing option if dealt with appropriately.
Your Own Savings
If you have any savings set aside, and do not like the idea of owing anyone or any other company, you could fund the initial stages of your start up through your own savings. Though you may have to use all your savings to achieve this, it does show potential future investors of the business how dedicated you are, and how much you believe in your business venture if you are willing to invest your own hard-earned money into it.
Though using your own money in this way comes with the risk of being left with no savings if things don’t quite go as planned, at least you aren’t left in debt to a bank or other lender, thus avoiding any risks of losing your assets. Using your savings may just be the extra push that you need to see your idea through, because you know you are the only one who will miss out if the business fails.
Ultimately, whilst trying to originally source your small business start-up, if you approach it with a clear business plan, and as much determination as possible, it is simple and entirely possible to find some form of finance for your new venture. If you are turned down for one route, don’t sit back and wallow – get straight onto the next one, and again until you finally succeed.