Nearly every day, millions of people around the world wake up with new business ideas. The rate at which people are starting their own businesses is encouraging. A recent report indicated that close to 550,000 new businesses registered with Companies House in 2013. A greater percentage of those numbers, 95%, were small businesses registered by individuals. That tells you something; many people are daring it alone. For those considering this option, financing businesses at the initial stages has proven to be a tall order in the past. Luckily, such people can explore multiple funding options thanks to the current financial system. So what are some of these options?
Traditional forms of financing start-ups might be popular but they are fighting it off with new opportunities like harnessing the crowd. Presently, several crowdfunding sources are available. This way, consumers are able to get funds from different people even as they pitch their ideas and display their competitive advantages. In the past, such sites have managed to raise up to £500 million for investors. If embraced appropriately, crowd funding can go a long way infunding business ideas. While individual investors might provide low cash levels, say $20, the collective amounts of several investors are possible to offset the financial needs of a start-up.
For several years, renowned sites like Crowdcube have helped a lot in enabling investors to purchase equities into companies in need of funding. For a business with better prospects, you can be sure of seamless funding if you are able to manage a successful pitching. In the process, the investor gets a promise of making gains if the business materializes into a profitable venture. For small businesses that are just getting off the ground, such opportunities are worth exploiting.
This is another form of fundraising with closer ties to crowdfunding. In this case however, a group of investors offers debt-free financial support to a start-up in exchange for equities in the company. The venture capitalists are individuals who are willing to support great business ideas with hopes of getting returns when such businesses make profits. Depending on the percentage of ownership you will be giving away, the venture capitalists can end up having significant control over your business.
To get such funding, one needs a good pitching coupled with a workable business plan. In addition, you need to have realistic financial projections. Before taking such offers however, it is important to note that venture capital firms are more likely to take active roles in management of the business. As such, you need to strike a deal with a firm that guarantees greater support beyond funding.
It is easy to assume that your bank will turn you down if you are in need of business funding. Actually, many entrepreneurs think of other sources when looking for start-up funding with their personal banks being the last resort. It shouldn’t be so. Currently, several banks are willing work with start-ups. Banks aren’t just for mortgages. In the past, they have proven to be effective lenders for both small and medium-sized enterprises. That is something worth taking advantage of. With a good credit score, your business can receive a massive financial boost from the banks.
To be able to benefit from such funding sources, you will need a good business plan together with financial projections. Most banks help their clients to work on this so that shouldn’t worry you off. As long as your business meets the lending criteria, many banks will be willing to provide loan facilities and overdrafts. The deal gets even sweeter with recognisable banks like Metro Bank that offer special benefits to entrepreneurs including personalised advice and even free banking at the initial stages. Who wants to miss that?
Loans and Grants
For centuries, start-ups have thrived on loans. It is not like the trends are about to change. Applying for a loan is an easier and quicker way of raising funds to finance one’s business. Entrepreneurs with great business ideas can benefit from government Start-Up Loans. With a repayment period of up to 5 years at 6% annual interest, this is a great deal. One awesome thing about the government loans is that entrepreneurs not only benefit from the funds but also free advice.
Worth noting however, loans aren’t just restricted to government facilities. Several organisations and financial institutions offer massive support to entrepreneurs. From debt consolidation companies to micro-finance institutions, the list is endless. In most areas, you will even find local authorities with established funds for innovations and business ideas favouring such areas. It is also possible to take advantage of certain blue-chip companies to offer help.
Several start-ups fail to see their glorious days because of inadequate funding during the initial stages. With so many funding opportunities to exploit, from traditional bank loans to crowdfunding, business failure due to inadequate funding shouldn’t be an option.