The number of small businesses taking off is increasing continuously, there was a huge increase in the number of new small business from 2015 to 2016; approximately 97, 000 more small businesses started. It seems that there has never been a better time to start your own business, which is promising news for any potential entrepreneurs. So, you have the perfect idea for a business, and you are ready to take on the world of small business but where will you find the funding?
Well there are multiple ways of getting the funding that you need, these range from personal savings to government start up loans.
Bank loans – it seems to be a general consensus that bank loans are near impossible to get, possibly because it is the traditional method and the competition is great. However with a good business plan, and a great idea, you can convince bankers to invest in your dream and ideas. Banks do offer loan and overdraft facilities if your business idea meets their criteria. To get you started, you can check out our start-up ideas guide and business plan guide.
Government start up loan – The government has set up a scheme to help entrepreneurs get started with their business. You can apply for up to £25,000 to help you get started, and this sum has to be paid back within five years at the interest rate of 6%. Certain restrictions apply such as the business being UK based as well as the applicant being over 18 years old. To apply and for more information, visit gov.co.uk.
Crowdfunding – There are multiple crowdfunding websites such as Kickstarter that help raise funds for relatively low cost projects. Crowdfunding enables you to set a target of funds to raise in over a period of time. However, it may prove to be difficult to get sufficient funds to start a business. If you have the power of persuasion and you can really sell your idea to the masses then give crowdfunding a try. It definitely can be a good idea to consider if you already have some funds but need extra help. You can find out more on crowdfunding here.
Angel investors – enticing angel investors to invest in your business is a great idea, however you must be prepared. Carry out research on potential investors, you can also search online communities such as AngelList to get a good idea of who you can approach. Make sure your business plan and pitch are perfect, you will really need to use both to stand a chance in the crowd. Research is a vital part of making a strong impression, make sure you are fully aware of the market you want to enter, showing expert knowledge will be expected. To get a good grasp on how to really impress an angel investor, put yourself in their shoes, would you invest in your idea? Are you really selling your idea in the perspective of a potential investor?
Peer to peer loans – these are an alternative to traditional banks loans. You have to go through a fairly simple online application, compared to applications for banks. The interest rates vary for these kind of loans, therefore you should take the time to consider the benefits in the long term. To attract peer to peer lenders, you must make sure that your credit score is steady and healthy, although credit score is still important for peer to peer loans, it is not the ultimate deal maker/breaker. If you opt for this type of loan then make sure to carry out research, and compare in order to get the most suitable deal for your business. More on peer to peer funding here.
Personal funds – using personal funds to start a business may be the easier and quickest way to fund your business, however you must consider the risk. If you have savings and/or a large sum waiting to be invested in your business idea then that is great. Although most business owners expect their business to succeed, it is imperative to ask yourself the question, can I afford to lose the money being put into starting the business?
Family and friends loan: Asking friends and family is also an idea to consider. This can be hassle free because you will not have to deal with bankers, investors or applications. Also, you can perhaps decide on a better interest rate because the most prevalent incentive on the part of the lender is to help. However, the downfall of getting loan from family and friends is the affect it may have on personal relationship, it could be damaging if the loans cannot be paid back.