Starting a business can initially be a costly venture. Thankfully, there are a variety of different funding options available. After establishing what costs you might incur, including startup costs and running expenses, you can consider what financing options might work best for you.
Cash for your business can come from a wide variety of sources, including your own personal savings or borrowing, friends and family, outside investors, bank loans and grants. The type of funding that is appropriate for you will depend on factors such as the amount of money you require and what your business does.
This is the most accessible funding option for those starting in business. If you’ve had a great business idea, it’s a good idea to start planning and saving right away so you’ve got money accessible to you as soon as you form your company. Whilst it takes careful planning and your own money is at stake, building a business yourself from the ground up can be a very rewarding experience.
Traditional means of personal borrowing includes things like a mortgage, a private loan and credit cards. Borrowing money always carries risks so this route should be carefully considered.
You may have generous friends and family who are willing to gift or lend you finances to help you get your new company up and running. Another option is to offer them the option to buy shares in your new business.
Reaching out and successfully securing investment from outsiders such as business investors often requires a strong business plan. Although there are many organisations out there that dedicate themselves to funding new businesses, competition can be tough and investment is often given on the condition that they receive a significant portion of the business.
In the past few years, alternative means of outside investment have become increasingly popular, such as accelerators and crowdfunding. Crowdfunding allows you to pitch your business to the masses, whilst accelerators combine seed capital and mentorship support.
Like dedicated business investors, banks need a lot of reassurance before they will offer you a business loan. Again, a thorough business plan may help you here. Bank loans carry risks just as any form of personal borrowing does.
Grants can take the form of outright cash, 0% interest loans or subsidised loans. You usually have to meet very specific criteria before you become eligible for a grant and their attractiveness means that competition is very high. There is a risk that you will spend time applying for a grant just to be unsuccessful, but a grant can be a very useful means of funding your business.
If you are interested in learning more about the funding options available when you are starting out in business, @UKplc Company Registrations accountancy partner KPMG offers a dedicated guide.