The following article was written by Jamie Hunts. He has years of experience dealing in the personal finance sector and as such wishes to share his knowledge with the readers in order to help them out with their business. If you’re from the United Kingdom and you’re looking for ways to finance your small business, then this may be really helpful for you.
If you are planning to start your new business, then having enough capital to finance it can be a problem. No business can work without the essential tools and techniques needed to get the business going, and none of these can be put in place without a budget. Even if you have a working space, stock and a website, you will still need a level of investment to bring customers to your business and maintain good relations with them and most of the time that means finance.
You don’t need to look somewhere else because I’m going to tell you the most common ways to finance your small business start-up below.
Ways To Finance Your Small Business
1.) Apply for grants and initiatives
In the UK if you are under 33 years of age, then you can benefit from a Government initiative that lends loans of between £1-30,000 to business start-ups with a repayment charge of only 6%, which is extremely generous in this financial climate. In order to take advantage all you need to do is locate your nearest sure start scheme and apply for a loan, which is normally approved within 10 days and the money is in your account three days after approval. As part of the scheme, you also get a mentor that can guide and motivate you. That mentor is usually a successful businessperson who’s been there, done there own start-ups and will be happy to help you on your venture.
2.) Use your own money
Of course, if you have some savings then it is usually better to use your own funds rather than being in debt to someone else. The only major concern when using your personal finance when starting your business is that it can often be difficult for you to stick to your budget. If you are using your own money, always remember to stick to a very strict budget and not give yourself any leeway. You don’t want to get into bankruptcy because of your small business.
3.) Pitch for an investment
If you are starting out in a business that has a high level of crossover and relevance for existing companies and you have a unique selling point, then you can search for a sponsor who will invest in your business for a set return. It is similar to a loan, except that an investor has a more vested interest in seeing the business grow as they hold shares in the company, whereas a bank or loan company is only interested in having their money paid back.
In other words the investor does want his original amount back, but with his shareholding generating further returns he wants to see the business succeed and flourish, whereas with the bank, they only want the loan repaid and could not care less what happens to the business after that.
With an investor you may have to make a few calls, give a few presentations and do some sales work, but if you can get funding out of them, as well as their time and expertise, then this is definitely one of the most promising routes to take, for as long as your idea is a good one, then doing this isn’t that hard or scary as it sounds.
4.) Utilize crowd funding
Crowd funding is a new fashion in raising finance. Crowd funding is a system whereby groups of people gather online on crowd funding websites to invest small amounts of cash in projects they believe in and support. As there are so many people contributing, it is possible to raise thousands of pounds in this way. It is important to be careful however, as you may end up giving away the majority of your business online if you don’t think through the figures properly.
5.) Talk to the bank
Banks normally have a lot of incentives for new and start-up businesses and will normally grant small loans and overdraft facilities for start-ups with a robust business plan. Of course, it doesn’t really matter how fancy your formulas are, if you want to win a loan at the bank you will ideally have some customers and some order forms and a very basic explanation of how the income and outgoings are going to work.
The bank will want to see projections, however this is really more of a test of your ability to be realistic and plan ahead. Beware though as what many people do is try to impress the bank with exaggerated financial returns for the business without realizing that forecasting is simply a test exercise to check your reality gauge and planning.
If you are looking to begin your own start up and require financing or advice, one of the better ways to go is to speak to your local financial adviser. They already have spoken to and helped multiple people in your situation and could easily help you on your business problems.
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