Start-up Finance

Every entrepreneur, faces a number of avenues when searching for start-up finance. You may start your business and only be able of taking it so far without further funding.

  1. Own Money or Family Loan- Business doesn’t always run according to plan particularly if you are a start-up. It can require a lot of patience and hard work on the part of those putting money in before they see some return. You should manage expectations well in advance to avoid running into difficult issues that could affect personal relationships.
  2. Bank Loans – All banks have small business advisors so book an appointment with a business manager about a loan. Although this would appear to be the natural option, it is very difficult in today’s climate to get banks to lend unless you have sufficient collateral (which most start up businesses don’t have). Unfortunately, banks are risk averse and will not always have an eye for the business potential ahead of the financial risk.
  3. Business Grants – There are numerous Business Grant Schemes nationwide, tailored towards each industry sector and business type. For a helpful list, go to Business Link, a key govenment resource. Keep in mind that business grants will typically apply to a specific project rather than general business costs. The Prince’s Trust provides funding loans to unemployed 18 to 30-year-olds with bright business plans. The trust offers up to £4,000 for sole traders, or £5,000 for a partnership.
  4. Venture Capital – Venture Capitalists help meet a crucial need when it comes to start-up finance, however in return they will often want a large part of the company.
  5. Angel Investors – ‘Angel Investors’ are sophisticated or high net worth individuals, can help your company get off the ground. They usually provide funds in exchange for a share of the company. Angel Investors can also bring with them a track record in similar businesses and much needed experiance and contacts. They are as much of a business partner as a financial one. The great thing about this option for start-up finance is that it works on a simple principle – start-up finance in return for equity, with the possibility of experiance thrown in. This formula has a strong chance of success since it creates a good foundation for business partnership where both parties have similar interests. Unlike bank loans, there are no risks of defaulting on repayments or bankruptcy, as any repayments are often pre-agreed between parties and linked to how the company is performing.

 

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