Raising Funds to Launch a New Business Startup


A guide to raising funds for a business startup

It’s perhaps the single most common and important question among ambitious entrepreneurs:

“How do I find the money to start my business?”

Having a fantastic business idea and all the enthusiasm in the world is one thing. But without the hard currency needed to breathe life into your vision, it’s all for nothing.

The problem being that contrary to popular belief, raising funds to launch a new business – even if the concept itself is outstanding – is never easy. That said, with such a huge number of avenues to explore, it’s always a realistic possibility.

Trial and Error

One important lesson to learn as early as possible is that if you don’t succeed, you need to try and try again. Just because one potential funding source rejected your application doesn’t mean the same will happen next time around.

What’s more, ensuring you get the best possible deal for your new business startup means taking the time to consider every option on the table. Just because one source of funding is more easily accessible than another doesn’t mean it’s the best source of funding for your business.

So for the benefits of ambitious entrepreneurs with every intention of building successful businesses, here’s a brief overview of just a few of the available funding sources to consider:

Conventional Bank Loans

If you have a solid credit history and are in a relatively decent financial position, conventional bank loans from the high street could prove helpful. As things stand right now, typical interest rates on personal loans continue to hover around their lowest levels in recent history. While personal loans are typically available in comparatively small sums, long-term repayment options can be great for new businesses.

Credit Cards

While credit cards are always an option, taking things to extremes can quickly become costly. It all depends on the APR attached to the credit card in question, along with when the balance is repaid. If you only pay the minimum each month, you could find yourself with significant outgoings that are unlikely to benefit your business. Used sensibly however, credit cards can be extremely flexible and versatile.

Mortgage Extensions

Entrepreneurs who own their own homes can usually tap into their property’s value with relative ease. Mortgage extensions can quickly and efficiently release at least some of the value tied up in your home. That said, it’s entirely down to your mortgage provider as to whether you are permitted to use a mortgage extension for business purposes. Still, it’s always worth asking.

Business Start-Up Loans

The UK government continues to pledge its commitment to British business, offering a variety of business start-up loans with extremely competitive rates of interest. Available up to a maximum of £25,000 and subject to interest of approximately 7%, it’s simply a case of convincing the decision makers that you qualify for assistance. In any case, all government-sponsored business loans need to be repaid in full, regardless of whether or not the business succeeds.
(source: gov.uk/apply-start-up-loan)

Loans from Friends and Family

If your business idea is largely guaranteed to generate healthy returns, it may be possible to source the required funding from people already in your network.  Should your business prove successful, the fact that your friends and family have something of a stake in the company can make the whole thing even more enjoyable and rewarding. That said, it’s important to consider the potential consequences if your business fails.

Crowdfunding 

A crowdfunding site like Kickstarter.com can be perfect for raising capital for creative and unique ideas. It’s simply a case of setting a target – say £10,000 – and a timescale – say 60 days – during which time investors and everyday members of the public from all over the world are invited to contribute. The idea being that if your business succeeds, those who contributed to its development are provided with something in return. Shares in the company, an agreed payment or commission, one of the products/services you offer etc.

Peer-to-Peer Loans

What’s great about peer-to-peer loans – aka social lending – is the way in which even when you’ve been turned down by every conventional lender across the board, you may still be able to locate a willing investor. While interest rates tend to be somewhat high due to the potential risks involved, it’s nonetheless worth checking out the best social lending sites to see what’s available.

Consider Business Grant Opportunities

What could be better than securing an affordable loan for your business?

The kind of initial funding you don’t have to repay.

Right now, you’ll find an extensive list of government grants currently available in the UK over at Gov.uk (source: gov.uk/business-finance-support?keywords=&types_of_support%5B%5D=grant).

Unsurprisingly, certain sectors – such as agriculture and manufacturing – tend to attract significantly more support than others. What’s more, while funding for certain businesses and projects may be available in certain areas, it may be heavily restricted elsewhere. Your geographic location could have a strong influence on whether or not you qualify.

Look at the local and regional opportunities as well as national offerings. There’s funding available in specific geographical locations which can’t be found in others.

Establishing Eligibility

If you pinpoint a government grant that seems to suit your business, you’ll need to establish your eligibility in accordance with the following criteria:

  • Business size
  • Business type
  • Any funding currently in place
  • Reason for wanting the grant
  • Industry you operate in
  • Project time-frame

After which, it’s simply a case of completing your application and presenting your case to the government. You’ll need a comprehensive and compelling business plan, which includes key financial data like projections, cash flow, profit and loss forecasts and so on. Complex and time-consuming, but potentially opening the door to subsidised funding that doesn’t need to be repaid.

Ask the Experts

If in any doubt as to which of the available avenues to focus on, it can be worth consulting with an independent professional. IFAs, specialist lenders, even local government offices can provide useful information on how to proceed.  Particularly if you have already attempted to secure funding unsuccessfully.

In most instances, persistence pays. If you’re genuinely confident in your business idea, you’ll eventually find a willing investor to support its establishment.

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The advice and processing on all financial products introduced via this website will be handled by UK Property Finance Ltd, which is authorised by The Financial Conduct Authority (FCA) no 667602. The FCA do not regulate all mortgages such as Buy to Let and Commercial. Think Carefully before securing debts against your home. Your property could be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.

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