You have a great business idea or you’re looking to take it to the next level, but now you need funding to start it up or get moving. Knowing where to start looking for money to invest into your new business can seem extremely daunting. That is why we have put together a list of different funding options, so that you can choose the best route for your business.
Before being able to choose the right funding for your business, you will need to consider:
- Your motive behind starting a business.
- What the money will be used for.
- How much money in total will you need?
- How soon do you need the money?
- What is the nature of your business?
- Ultimate goals and milestones.
- Any future goals and plans.
- Target market size.
This is arguably the easiest and most appealing option to finance your business. By using your own money to start up your business you will not be in debt to anyone and have sole control of your business. However, a large con with this option is that if your business fails all of the hard work you had put into your savings and business will have gone to waste.
Angel investors are individuals who will provide funding for a business start-up in exchange for convertible debt or ownership equity. They are a good choice to help fund your business as most potential investors in the industry you are entering are unlikely to invest in the early stages when the chances of failing are high. Some angel investors prefer to work through angel groups or angel networks to share investment capital, while many still prefer to work on their own. Angel investors can offer valuable advice and guidance to start-ups as they have experience in the industry you are entering. They also offer flexible business terms; however, you may have to give up some control of your business in exchange for funding.
Crowdfunding is very popular amongst start-ups and involves funding a project or business by raising small amounts of money from a large number of people. This is typically done online using websites such as Kickstarter, Patreon and GoFundMe. Each of these sites will offer a campaign type, such as reward, subscription or donation, and require a campaign fee at the end of the campaign. Campaign fees usually sit at around 5% of the total funds raised by the end of the campaign. Having a strong social media presence will be very valuable when it comes to sharing your crowdfunding campaign. The more people that see it the more potential investors you will have. This type of funding requires dedication and patience before results may be seen.
Venture capital is a form of private equity financing provided by venture capitalists from private firms. They provide a large amount of funding to start-ups and emerging companies in exchange for a large portion of equity in the business. They will also expect to receive returns once the business goes public. Venture capitalists are motivated by the money and will only invest in your business if they believe it has the potential of providing good returns on their investment. Similar to angel investors, venture capitalists can offer valuable advice and guidance to support the development of your business. Funding from venture capitalists will give your business immediate credibility as they have decided your business has strong potential and will thus encourage others in the industry to also invest. The only downside to accepting their funding is that you may be forced to give up a large portion of your business in exchange for the money and support.
Government Start-up Loan Scheme
In 2012 the UK Government set up a loan scheme, named The Start Up Loans Company, to help support new businesses in the UK. The scheme provides start-ups with fairly small loans of around £6000, but you may find that you are eligible for more depending on your circumstances. Alongside funding, the scheme provides mentoring to help your business find its footing. Their loans are repayable over a one to five-year period with a fixed interest rate of 6%. You can still apply for a loan even if you have already made your business public and started running it, as long as you have been trading for less than 12 months. Go to their website to see if you are eligible.
Government Childcare Funding
Some local councils will provide funding to business that involves childcare. Check to see if your local council offers this and if you are eligible. The funding will not be enough on its own, however, it can help support your business.
This can come from charitable organisations or donations. For those with childcare businesses or organisations the national lottery has provided a lot of funding to individual businesses of this niche. However, it can be difficult and time consuming to attract this kind of funding. Check out National Lottery Awards For All for more information. Another option for charity funding is Coop Local Causes. If you are eligible Co-op members will be given the opportunity to donate to one of their local causes and your business will be made an option. Be aware that you are unlikely to get large amounts of funding from it.