Finding a reliable source of external funding is a priority for many start-up business owners, but raising the money you need can be challenging. The banks used to be the first port of call for new businesses looking for funding, but bank finance is difficult to secure these days. Thankfully, there are a number of other options:
Family and friends – Investment finance from family and friends in return for equity in your business is a good place to start. You’ll be able to access the funds quickly and negotiate a competitive deal, but as they are unlikely to be sophisticated investors, you may not benefit from any advice or support.
Start-up loans – Although bank finance for start-ups is more difficult to come by these days, there are other organisations such as local authorities and small business associations that may provide funding in the form of a loan. The terms and conditions of the loan will be clearly defined so you will know exactly how much you have to repay. However, you may be limited as to how you can spend the money and it may take some time and effort to secure.
Grants – Grants are an excellent source of start-up finance as it’s money that doesn’t have to be repaid. Start-up grants are available from government or EU-backed initiatives such as InnovateUK, Horizon2020 or British Small Business Grants. Securing a grant can help to raise the profile of your business with investors and prospective clients. The downside is that the process can take time and not all businesses will be eligible.
Angel funding – Angel investors are experienced individuals who inject capital into start-ups in exchange for equity in the business. They may invest through crowdfunding platforms or through investor networks that pool capital form a number of angel investors. They tend to be experienced entrepreneurs who can add value to your business in the form of support and guidance. However, in return, you will relinquish some control of your business. The UK Business Angels Association is a good place to start your search.
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