Every new business requires capital. This is likely to be one of your biggest concerns when starting a new venture. When a new business doesn’t have enough money, it is likely to impact it’s chances of getting off the ground, whilst obviously affecting it’s growth potential. The amount of capital which each company needs will clearly vary from one to another but money is needed by all businesses either way. It might be required for purchasing stock or initially hiring staff that will work in an office, or even something as basic as securing appropriate business premises. Soon after a new company has been formed, here are some of the options which should be considered in order to obtain capital:
A Business Loan
Borrowing from a loan company isn’t the only option available for acquiring capital – it could be provided by the UK government. When a company hires young people or is located in an area with high unemployment levels, it might be eligible for a loan from the state. With a reduced rate of interest, borrowing from the government could be an excellent option and can provide invaluable help in this early stage of a new business being established. Even if a loan isn’t worth a huge sum, it is still capital which is sorely needed by an new startup.
Government Grant for Business
A government grant is another prime source of finance for new companies. These publicly funded schemes are designed to encourage new and expanding businesses, to bring wealth and ultimately generate jobs. To help achieve this the government makes available a portion of taxpayers’ money to help and encourage enterprise via small business grants. This cash gets distributed through a variety of ministries, departments, agencies and quangos on a national and regional basis. Many businesses may qualify for a number of different business start-up grants and support schemes which are distributed in a wide variety of forms.
The UK government have provided an online resource, the ‘business finance support finder‘, which is an excellent source to assist those thinking of starting a new business find relevant funding. This allows you to customise your search according to a number of different factors: location, size and services/products provided.
As no interest has to be paid on these and any other grant which is issued by local and central government, this is the best way to secure startup finance. As the application process for grants is competitive, be sure to read through the relevant guidelines so that the right information is submitted.
Business Overdraft Facility
Additional funds can be secured from the bank you choose to provide your business account. If a bank doesn’t offer its customers an overdraft facility, or the sum offered is not sufficient, consider another bank which has a higher overdraft limit. As it doesn’t take long to apply for an overdraft, an organisation can obtain capital relatively quickly.
An individual that invests in a newly formed company, an angel investor can give it the boost which it is looking for. In return for their investment, an angel investor might ask for a seat on a board of directors or a percentage of future profits. They are different from a venture capitalist because they invest soon after a business first incorporates.
By understanding precisely just how much money is required at the outset, a company will know exactly what it should be aiming for. Lack of finance is often the sole reason a new business fails, not because it doesn’t have a good product or idea. Financial planning is therefore key to the future success of any new startup.