If you're thinking of starting your own business, you're biggest obstacle might be getting the money just to start things moving.
So, how can you secure the funding you need to start your dream business and become your own boss?
Luckily for you, there are a number of ways you can secure the money you need to get your business idea off the ground. Even better news: we've pulled them together into one handy list below.
Let's get started!
1. Bank Loans
Bank loans are the most traditional way to get funding for a business, but they’re also extremely competitive.
To maximise your chances of being accepted for a bank loan you should be well prepared with a solid business plan. If this plan and your business meet your bank's lending criteria, you may be able to secure a loan or overdraft facilities.
2. Government Start-Up Loan
The government has a scheme to help entrepreneurs to get started with their business.
This means you can claim up to £25,000 as a start-up loan. This usually has to be paid back within five years at an interest rate of 6%. There are some restrictions: your business will have to be based in the UK and the person applying for the loan needs to be over 18. You can find more info about how to apply by visiting gov.co.uk.
Crowdfunding is a pretty new way for both businesses and individuals to raise finance. Essentially you would make use of an online platform and ask for small amounts of investment from lots of people.
There are several really great options out there to start finding the right people to invest in your business, such as Crowdfunder, Crowdcube and Kickstarter.
4. Angel Investors
An angel investor is an individual with a high net worth who provides financial backing for small startups or entrepreneurs. This will typically be in exchange for ownership equity in the company (think: Dragons Den).
Finding an angel investor to buy into your business is a great idea, however, you must be prepared.
Any potential investors should be researched thoroughly. There are a number of online communities, such as AngelList, which are good places to start to gain an idea of who you can approach. You’ll need a perfect business plan and stand out pitch to help you to stand a chance amongst the crowd.
5. Peer to Peer Loans
A peer to peer loan is an alternative to a traditional banks loan. It involves a pretty simple application process when compared to the hoops you’d have to jump through to apply for a bank loan, plus the interest rates tend to be more varied.
To attract peer to peer lenders, you’ll need a healthy credit score. You should also make sure you’ve researched the different loans available to find the best match for you.
6. Personal Funds
Using your own money to start a business is possibly the easiest and quickest way to fund a new business, but it comes with some risks.
If you have some significant savings to invest in your business then great, but you should ask yourself: can I afford to lose this money if my business fails?
7. Loans from Family & Friends
Asking a friend or family member for a loan can be a hassle-free way to secure funding – no need to submit any applications or liaise with bankers or investors. You’ll probably be able to agree on a better interest rate too – given that your investor will have a personal interest in your new venture (seeing you succeed!).
However, borrowing money from a loved one can be tricky. You could run the risk of damaging your relationships if for some reason you're not able to pay the loan back.
And there you have it, all of the options at your disposal to obtain funding for your small business. Be sure to explore your options to find the right fit for you before you're stuck in a long term agreement.
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