Business Funding

If you want to better understand how to fund your new start-up, find out more in this guide to business funding from Company Formations 24.7.

It is often the case that finances are one of the single biggest inhibitors for start-up companies.

Trying to generate capital to fund your new venture can seem impossible, but there are a number of ways in which you can find the funding you need to turn your dream into reality – and a profitable one at that.

Business loans

One of the most common ways in which to finance a new business is to obtain a business loan.

This can be done either directly through a bank, or through a government initiative such as Start Up Loans. This initiative connects entrepreneurs with government business loans and financial mentorship. In order to apply for these government loans, you must be 18 years of age and a resident of the United Kingdom. You will be assigned a delivery partner, who will help you develop a comprehensive business plan. This will be assessed, and the Start Up Loans Company will decide whether or not to issue a loan. Should your application be approved, you will then receive a low-cost unsecured loan at a fixed rate of interest, which you must pay back in full within five years.

You do not of course have to rely solely on the government – most financial institutions will offer business loans as part of their overall business banking. Again, you will be assigned a business manager who will assess your business plan and decide whether you will receive a loan, along with the borrowing conditions. These loans often range from a minimum of £1,000, ideal for small businesses, up to large sums of £25,000 for larger scale companies.

Although not as commonly obtained as traditional loans, government grants are also available, providing further government funding for small businesses.

Government grants

While there is start up funding available, the process of applying for a government grant can be a long one.

There is a great deal of money put into publicly-funded schemes each year, and yet this money is often left unclaimed. This is because the process of navigating different application criteria and crafting numerous different bids and proposals can seem like more hassle than it’s worth. However, it’s important to note that a portion of taxpayer money is each year allocated into government grants that are designed to help businesses of different sizes across various sectors. Therefore, that money is indeed available – it’s up to companies to find time to invest in applying for it. Successful applicants will receive a cash award, the amount of which can range from smaller sums of around £2,500 to large six-figure sums (although these are only likely to be awarded to “high-growth” businesses). In order to find a directory of government grants for small businesses, you can access their Business Finance Support Finder to learn about over 300 direct grant schemes.

Angel investors

One method of funding for small businesses is to obtain financial backing from an angel investor.

An angel investor is typically a wealthy individual, often an entrepreneur or business owner themselves, who will provide capital for a start-up business venture. Unlike creditors who will supply the capital in the form of a loan and expect repayment, an investor will provide it in exchange for part ownership of the business, or some other form of convertible debt. Anyone can be an angel investor provided they believe in your company; this means that technically, even friends and family members can provide you with the money you need. However, mixing professional and personal relationships can not only prove tricky, but loved ones may not have the business acumen to make an informed decision. If they do, their judgement could be clouded by their emotional attachment, and therefore finding an experienced and ideally impartial angel investor is a preferred method for many people.

In order to do this, you will need to network extensively, as finding someone with the means and desire to part with precious capital to fund your venture can be easier said than done! Joining angel investor networks is a great way to do this, and there are a number cloud-based networks available online to make it easier to connect with someone who may want to invest in your start-up.

Crowdfunding

A relatively new method of funding for small businesses, crowdfunding is becoming a popular way of obtaining the money you need for your start-up.

In this instance, members of the public can invest as much or as little as they like to get your initiative off the ground. Instead of relying on one large cash injection from a sole investor, you can fund your start-up using the cash obtained through several smaller donations. You will need to create a compelling campaign that grabs the attention of potential investors, and put this across one of the many online platforms that are available to support crowdfunding. If your target is reached, you will receive the money less applicable fees, and there may then have to be further steps taken with Companies House and the bank depending on your terms and conditions.

As an established formation company, we have full a list of resources that can be of assistance when it comes to finding funding for your new business venture.

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