by Sarah Atkinson
Money makes the world go round – especially in the business world. If you’re looking to start your own company, there are plenty of ways to secure that vital first funding.
You might have a great business idea, a solid business plan and have done all of the research and marketplace analysis – but without cold hard cash, it’s impossible to get any business off the ground.
There are a great many ways that you can fund your new business: but which is the best?
Well, there is no single right answer – each new business is completely different, so the most suitable method of funding is also different. It all depends on your circumstances, as well as the type of funding you would prefer, and of course, the type you are able to secure.
Grants are usually either repayable or direct. A repayable grant is generally repaid upon the business meeting certain levels of turnover – so if the business fails, the grant will not need to be repaid. A direct grant is awarded to you, but sometimes you will need to match the level of the grant, so these might not be suitable for everyone.
Grants are a very popular way to fund a new business. There are many types of grants available, from local schemes such as Business Link, to government grants and even European grants, provided by the European Commission.
There are over 100 departments and agencies across the UK who award grants based on their own criteria and objectives. It’s always worth checking the terms of all grant schemes as your circumstances might mean you are eligible for funding where others aren’t, and vice-versa.
If you need funding to cover a gap in your skill set, such as bookkeeping or accounting, you may be eligible for funding to cover your training in this area. This can prove invaluable, especially over the long-term as you can save a small fortune in accountancy fees by completing your own tax returns each year. This is more of an investment in you as an individual rather than in new business, which is really important.
The most obvious type of funding, a bank loan can be relatively easy to obtain. However, it should be noted that bank loans for business often carry a higher rate of interest than private loans, and the repayment period might be somewhat shorter too.
Think very carefully before if you’re tempted to re-mortgage your home or use anything else as collateral: it can be risky if your possessions are tied to the fate of your business.
Soft loans are a little less risky than bank loans, and often have certain perks associated with them such as repayment holidays or lower rates of interest. You may find it impossible to start your business if your start-up costs are very high, so a soft loan may be more appealing than a bank loan.
It is even possible for soft loans to be written off, perhaps if the business fails due to lack of business or for personal health reasons, so there is a bit of a safety net – but, as with all forms of funding, always make sure you understand the terms and conditions.
This form of funding is growing in popularity. Business angels are people who have established their own successful company and are willing to invest in others to give them a similar opportunity for success. They are financially savvy and can offer solid business advice such as advice on how to register a company, and will have a relevant skill set that you can use to your advantage. There is a very personal connection between new business owners and their business angels, but never be afraid to walk away from a deal – successful business owners may have a better understanding of the numbers than you do, and you might find they can use this to their advantage.
There are plenty of ways that you can secure funding for your new business – but as with anything in life, you should take as much time as possible to understand the options available to you and the terms and conditions of any form of repayment. Good luck!