We've heard time and time again that the scariest step for any startup is to try and secure funding. It is one of the main causes for entrepreneurs to never even start their business venture. That's not you though. We're here to show you some different ways of finding funding for your company.
There are several initiatives through banks and the government to get startups on their feet via the use of a business loan. In this case, a loan is a sum of money that you would borrow and pay back with interest over a set period of time.
Often, financial institutions or companies such as the Start Up Loans Company, will assess whether or not they think you are able to take a loan. This process normally involves submitting a business plan for assessment and then working alongside a business manager to develop the plan. Borrowing conditions are put into place and a sum agreed upon. Loans can range anywhere from £1,000 to £25,000+.
You must be over the age of 18 and be a UK resident to apply for most business loans.
A portion of taxpayers' money is set aside to help businesses of different sizes, but the publically funded schemes are often left unclaimed. This is because the application procedure can be time consuming.
If you're successful in your application, however, then you can receive cash awards ranging from £2,500 to 6 figure sums. If you're a “high-growth” business, you are more likely to get the larger amounts of money. As it is a grant, you will not have to pay back a single penny.
To find a government grant scheme, check out the Business Support Finder.
Angel investors are normally wealthy individuals with an interest in entrepreneurism. Instead of providing a loan, they will give the capital for your startup in exchange for part ownership of the business. It could also be a form of convertible debt which is most often seen in cases where families or friends invest.
It is best to find experienced angel investors that are impartial to avoid people who are tied up emotionally with the business or have poor business acumen. You can do this by joining online communities and angel investor networks.
Becoming one of the more popular ways to fund startup ventures, crowdfunding is being made more accessible by various online platforms.
The concept of crowdfunding is that any member of the public can put money toward a business venture in order to help them reach their target. The amount of the individual's investment is entirely up to them. This way, you can obtain your funding through several smaller donations rather than one or two big ones.
Many campaigns give incentives to get members to donate such as early bird products, posters or simply newsletters to keep their supporters interested and up-to-date with the progress.
Once your target is reached, you will receive the money minus any applicable fees that there may be. You then need to be aware of your terms and conditions to take the next steps.
An accelerator is a short-term program for startups (normally 3 months) in which you can be given access to a large network of mentors and investors. Startups in accelerators are given access to opportunities such as PR, design and consulting teams as well as other professional help to develop their startup.
It is common for an accelerator to have a small seed investment and equity exchanged for capital at the start of the program. This could range from £20,000 to £30,000 for a part ownership of the company (normally 5% to 10%).
To join an accelerator program, you must fill out an application. The applications are dependent on the individual accelerator.