“How to fund your business” is one of the biggest topics of discussion between entrepreneurs these days, particularly after a credit crunch and a recession. There is a range of funding options available, yet choosing the right choice for your business can mean the difference between success and failure.
Below are some of the best ways to fund your business when you’re looking to get off the ground.
Make use of your Savings
The savings that are sitting in your account, making little interest in the current financial climate, are a great way to make your money work for you. Funding your business with your own personal savings means you won’t need to ask anyone else to help you get started.
Not only will you avoid getting into any debt at the outset, but it also shows future investors that you are committed enough to put your own money behind your business.
Apply for Business Grants
Business grants can be difficult to find yet there are thousands available, in different forms. Getting through the application process might be tiresome and frustrating, but the fruits of your labour could pull through with significant results.
If you qualify for a business grant, it could provide exactly the right kind of boost you need to get your business off the ground. Alternatively, the cash injection can help it grow in more substantial and better ways.
Seek an Angel Investor
An Angel Investor is an individual or a group of people that offer an amount of cash in exchange for a share in your business. They could be someone you’ve worked for in the past, a friend or someone found through a funding network.
When making your pitch to an Angel Investor, it’s important to demonstrate you know what you’re doing, which includes ensuring you have an exit strategy should things go pear-shaped.
Some tips to help include:
- Demonstrate your passion for your business. Angels won’t be interested in investing in businesses that are trying to cash in on the latest trends.
- Show that you have experience on your side, whether that is through an unpaid advisor or simply the age and employment history of your team. Angels want to see that you can deal with a tough and changing economy effectively.
- Provide solid plans and analysis that demonstrate you know your market and have the expert knowledge needed to be successful.
- Develop a way to keep in touch with investors who you wish to attract. This is especially helpful if you do not have a strong track record as a successful entrepreneur. Sending them big company updates and developments will help keep them in the loop.
Take out a Bank Loan
Despite the closures of many high-street banks, there are still some that haven’t yet closed shop. Make sure you have a solid business plan and clarity on how you will receive your revenue before you approach any banks.
While banks may be much stricter with how much and who they will lend to, The government has earmarked additional funding for small businesses. Ask your bank about the Enterprise Finance Guarantee Scheme which may help you secure finance.
Use your Credit Card
Using your credit card to fund the early stages of your business may not be ideal, yet it is a viable way to secure the cash flow that you need. If you need a low sum of cash for a short period of time, there’s no reason to rule this method of funding out.
When using this option it is important that you are able to pay the money back quickly as the cost can rise once any interest-free periods have run out.
Crowdfunding sites like Kickstarter and Indiegogo can be a fun way to raise money for your business. To get started you set a goal for how much money you need and individuals will pledge amounts to help you meet it. Usually, you offer incentives for people to pledge, such as a free book for a certain amount of money.
It is important to remember that there is no long-term return on investment for this type of funding and you cannot write off donations for tax reasons.
Consider a Short-Term Credit Option
If you are refused finance from the banks, that doesn’t mean that no-one will ever lend to you. Online credit companies offer you smaller amounts that Banks usually don’t accommodate.
This form of finance often requires less documentation than bank loans and relies largely on your credit history and credit rating. You will have to undergo an affordability assessment to ensure you can meet repayments and interest rates can often be fairly high.