Do you have a brilliant and revolutionary business idea? An idea you are willing to work on no matter how difficult things maybe? Is it an idea you are willing to take risks for? In this article, you will be able to identify ways to fund your startup business.
Turning an idea into a successful business requires knowledge, training, luck, and, of course, money. So the question you will find yourself asking most of the time is this: “Where do I get funding for my startup?”
You’ll be surprised to know that there are a lot of ways to fund your brilliant business idea! The answer to this question lies in one of these ways we will be discussing below.
The Start Up Loan scheme
The United Kingdom government launched the Start Up Loan scheme in 2012 to encourage entrepreneurship among its citizens. It is a personal loan amounting from £500 to £25,000 backed by the government for anyone who wants to launch or to expand a small business. The interest rate of a Start Up Loan is fixed at 6% per annum, payable from one to five years.
In order to apply for this loan, you will need to submit a detailed business plan and a cash flow forecast in order to prove that your startup can afford paying the loan monthly. Once your loan gets approved, you will also be paired with a business mentor who will guide you for a year.
Grants for Small Businesses
UK companies that specialize and support innovations in different fields offer startup business grants for willing applicants. These companies offer financial assistance to startups with groundbreaking inventions and commercial potential. There are also companies that hold competitions, which award funding to winning startups.
There are also local boroughs that offer small business grants to startups within the neighbourhood. If you are looking to launch a business in a particular neighbourhood, it may be best to check local authorities for funding opportunities too.
Peer-to-Peer Business Lending
Applying for bank loans is quite impossible for startups. This is because large banks are not willing to take risks, so handing out their funding to businesses that haven’t proven themselves yet is very understandable.
However, there are a few lenders that aim to help young businesses that want to expand. There are peer-to-peer lenders that connect a few investors directly to small businesses who are in need of cash.
In the UK, crowdfunding has become a popular way to get funding for startups. There are a lot of existing platforms for crowdfunding already, and each platform offers a different investment model.
The good thing with crowdfunding is that startups are given an opportunity—not only to raise money and generate publicity—but also to measure if their product is interesting enough for the general public. This way, they can evaluate if it is wise to continue developing and producing their products.
There are two types of crowdfunding:
Famous platforms: Kickstarter, Indiegogo
These platforms offer ways to ensure a good number of sales before your startup begins manufacturing the product. Not only will this type of crowdfunding give you enough capital for your startup to take off but when the terms make the actual product the investor’s reward in itself, you won’t find yourself having to give up shares in your own company.
Famous platforms: Crowdcube, Seedrs
These platforms give startups an avenue where they can raise cash by turning their supporters into their shareholders. This is best for startups that aren’t centred on products and for small businesses that need to raise a big amount of money in order for their business to expand.
However, in this type of crowdfunding, as is mentioned in the name itself, investors are given equity in your business. The good is that they will most likely invest more funds than a typical customer would.
Angel investors simply mean wealthy individuals who are looking to invest in startups during a business’s earliest stages. While one-on-one presentation to a possible investor is a go-to approach for most startups, it is better to pitch your ideas to an angel investment network. There are a lot of angel investment networks existing in the UK already, and each network also specializes in different business types and industries.
Another way startups may get funding is through a venture capitalist. This is an investor who funds startups with very high growth potential. While most startups have stories about a venture capitalist, this form of funding is quite rare and is only possible for businesses that are quickly expanding. However, pursuing this type of investor can also consume a big amount of your time, energy, and even money since it will seem like you are courting them.
Not only will venture capitalists invest, they will also play a big role in your business’s operations as one of the associates or partners. The hard truth, however, is that most startups are not very open to this idea because this means they lose control of their business’s direction at the early stage, which is crucial when you are starting a business.
Family and friends
Lastly, of course, is you may get your startup’s funding through your own family and friends. This still is the most reliable way to raise money if you are looking to build your own business. However, there is also a risk involved in accepting this type of investment from your loved ones because money problems between our family and friends often end up being disastrous for your personal relationships.
While many of your family and friends will encourage you to continue looking for funding and to continue working on your startup, it is still a wise decision not to take money from your loved ones who can’t afford to lose them or those who do not fully understand the risks involved in starting businesses.
Whatever way of funding you choose to have for your startup, it is still best to get advice from people who have experience in starting their own businesses or those who have been successful in building and growing their startups.