A business must maintain a healthy cash flow, especially in the early start-up stages. Funding allows you to follow through on your business plans and expand your business.
In addition, the purchase of assets and hiring key resources for the smooth functioning of the business becomes more straightforward and faster when adequate funding is there.
8 ways to Get Start-up Funding
It is vital to secure sufficient funding for a start-up business to succeed and become a full-scale company. The challenge is that to obtain that necessary funding injection, you must figure out where to look.
Experlu sharing some of the ways through which you can get funding for your business are:-
1. Start-Up Loan Scheme
If you are looking to start a new business or expand your existing small business, you can apply for a Start-up Loan, a government-backed personal loan.
You can apply for a loan of between £500 and £25,000 at an interest rate of 6% per year repable over 1 to 5. There is no application fees or fees for paying off the loan early.
To become eligible for this loan, you have to ensure that:-
- You are at least 18 years old.
- You are a British citizen.
- You have (or want to start) a business in the UK that has been fully operational for less than 24 months.
If you are eligible for the loan, you need to present your detailed business plan and cash flow forecast to demonstrate that your business can afford the monthly payments.
2. Government Grants
Over 200 government grants for small enterprises are available throughout the UK. There are numerous government grants available, ranging from cost-saving and free equipment to cash prizes to help your start-up develop.
To begin your new business, you will need start-up funds to help cover the expenses, such as training, investing in equipment, or extending your customer base. For this, the form of government grant that can help you is a direct grant.
Crowdfunding is a financing model that uses a small amount of capital from many people to finance start-up businesses. You may want to skip crowdfunding if you are looking to establish a traditional business with no new and compelling concept.
A significant advantage is that you don’t need a highly detailed business plan to raise funds through crowdfunding. In addition, it is a tool that can help promote your new product or service, which means that you don’t have to spend as much time and money on marketing.
The two types of crowdfunding methods that you can use are:-
- Reward crowdfunding– Offering a product or a service to the people in future in exchange for an investment.
- Equity crowdfunding– Offering shares of the business to the people in exchange for an investment.
4. Loan from Family and Friends
Making use of the financial support of your family and friends is a reliable method of funding a start-up. Through this method, you can take a loan at low interest or no interest at all.
But borrowing from relatives and friends has the downside of dealing with the aftermath if things go wrong.
Thus, it is essential to consider all the pros and cons of this method to not let money create any problem in your relationships.
5. Peer-to-peer Lenders
Peer-to-peer lending (P2P) is also known as crowdlending. It connects borrowers with lenders, where borrowers can get money at a low-interest rate, and the lenders can get a chance to earn high returns.
You can use this method to get funding for your business without approaching the bank for a loan.
6. Venture Capital
Venture capital is a sort of finance provided by investors to start-ups and small enterprises with the potential for long-term growth. If you don’t have access to other debt instruments like bank loans, then venture capital funding is worth considering for your business.
But the most significant disadvantage is that venture capitalists typically receive shares in the company and thus, have a say in the company’s decisions.
7. Angel Investors
Business angels or angel investors want to invest in a business to exchange for a share in the profits. If you want an angel investor to invest in your business at the earliest stages, you need to have a highly detailed business plan to convince them of the high growth potential of your business.
Pitching your business to an angel investment network is usually an excellent idea instead of approaching an angel investor one-on-one.
8. Asset Finance
Asset financing is a form of lending that allows you to access your business assets such as equipment, machinery and vehicles without purchasing them upfront.
A vital benefit of this technique is that it enables you to use your existing assets as collateral for a business loan from an asset financing lender.
It is critical to consider all your operating costs and the immediate start-up cost to determine how much money you need.
You can take the help of an accounting firm to analyse which financing method is best suitable for fundraising for your business. It is crucial to maintain a balance in the early stages of the business because too much debt is a burden to bear.