One of the biggest hurdles when starting up is knowing how to fund your start-up business so you can get your dream off the ground.
Using savings may be your first option, but what if you need extra financial help for large equipment purchases? Getting a bank loan is a popular choice, but there are other ways to secure funds.
At RCP21, we have extensive knowledge grant funding, but don’t pin all your hopes on free money! If you are serious about your business, you have to be serious about investing in it. Investors will not want to give you cash if you haven’t the confidence to put your own money into your business.
Here are 5 ways to fund your start-up business…
1. Family and friends
This is the easiest way of raising funds but there are also risks! Family members are the most likely to believe in you and will want to help out. Whether it’s an advance on inheritance or a friend’s spare cash, most of us know someone who might help. Be aware that it could cause problems if things don’t work out. Even if the person offering the loan knows you well, a contract is advisable so everyone understands the pitfalls.
2. Bank loans
The most obvious route is a bank loan, but it can also be the most difficult. There are usually lots of forms and procedures, but banks have the money to offer to new businesses. You’ll need to get your business plan in place as banks ask for more than just a one-page plan. Remember, too, that you will be paying interest as well as what you owe.
3. Grants
There are a number of start-up grants available and it depends on your chosen sector. For example, Innovate UK provides grants for innovation, so if you are opening a shop it is unlikely that they will offer funding. Grants are attractive as they usually do not need paying back. But because it is government or local council money, there are usually very strict rules. Don’t let that put you off, be ready to prove the worth of your business.
4. Crowdfunding
This option is growing in popularity. Using online platforms, you attract funding from the general public. They either loan you the money (peer-to-peer lending) or take a stake (shares/equity) in your business. It is more suitable for businesses with a great growth potential that will attract plenty of attention. You can reach large numbers of people through this method but it could take time and effort drumming up the right PR campaign.
5. Angel investors
Angel investors are wealthy individuals who provide funding in exchange for a share in your business. Some investors work in groups, whilst others work on their own. Angel investors often have experience in other areas and can offer valuable business advice and guidance. If you want to retain full control of your business, this is not suitable for you.
There are other ways of attracting funding to start and grow your business. Our PEAT Project could be perfect for you as it offers free advice for eligible start-ups. It can also help you find funding, so contact us today for more details.
