If your New Year’s resolution is to start a business, you’ll likely need to finance it. A recent study shows businesses who opt out of applying for finance could be missing out on opportunities to innovate and grow.
With that in mind, we take a look at how securing finance could benefit your business and look at the variety of options available to you.
Get a loan
A loan is the most obvious way to fund your business venture. It’s a tried-and-tested method that gets results.
Despite what you may hear on the news, banks are still willing to lend you their money. You just need to be able to give them realistic cashflow forecasts, as well as prove that you’ll be able to pay back the loan with interest.
Each loan application is considered according to the needs of the business in question. Sometimes you may be asked to provide security against your loan, like your house or car, just in case you don’t repay.
If you haven’t heard of it before, crowdfunding could be an effective way of raising money for a relatively low cost.
Simply set a goal of how much money you’d like to raise over a specific period of time – for example, £2,000 over 30 days – then list yourself on a crowdfunding site (there are hundreds of them out there).
Friends, family and strangers then use the site to pledge money.
But this isn’t a viable long-term funding solution; it should only be used in the short-term to raise immediate capital for your projects.
Investors are your new best friends when starting a business. Their money helps you turn your dream into a reality.
So-called angel investors, who operate in groups or networks to share research and pool their investment capital, as well as provide advice to companies in their extensive portfolios, should be in your sights.
In addition to money, they bring much-needed experience to the table – and you can never have enough experience in the world of business.
Look for grants
You should never turn your nose up at free money. Everyone needs a helping hand now and again, especially when it comes to running a business.
Grants – one-off payments made by the government, councils and other organisations – are designed to help businesses flourish and get ahead, so make sure you look at what’s available out there for you.
The money is usually awarded for specific activities such as training, employment, export development, recruitment and capital investment projects, while some grants can be spent on anything.
Ask family and friends
Asking loved ones for a helping hand when getting started is the most common way of financing a new business. But this isn’t without risk. You could jeopardise personal relationships if you go about it the wrong way.
Make sure you have a formal business plan in place prior to approaching them though. This is one place where budding entrepreneurs usually become unstuck before they’ve even got their idea off the ground.
Supply formal financial projections, as well as an assessment of when your loved ones can expect to see their money again.
Posted by The Secret Businessman