What funding options are available for my business?
Start-Up Loans, crowdfunding, bootstrapping, equity investment, grants… If you’re thinking of starting a new business, good news! There are lots of ways to fund it.
But with so many options available, how do you know which one is right for you?
It’s a question I get asked by dozens of amazing entrepreneurs every week. Like South London-based Arieze Goyea, founder of smoothie and juice bar Goyea Organics.
Arieze got in touch via our website, after struggling to navigate her way through the maze of finance options available.
Sound familiar? I caught up with Andy Fishburn, Managing Director of Virgin StartUp, to cut through the noise and unpack a few of the finance options available to you.
Start-Up Loans
The Government’s ‘Start-Up Loan’ scheme provides founder-friendly funding at a fixed interest rate. Founders can apply for up to £25k per co-founder, over 5 years, and get access to free business advice, ongoing mentoring and support. It’s a great option for many early-stage founders, as you don’t need prior trading history. Nor do you need to have assets or provide a personal guarantee. National partners have given out more than £75m in funding to almost 6,000 founders since 2013.
Crowdfunding
A far less traditional funding route, crowdfunding involves raising small amounts of money, from a large number of people. In addition to raising funds, crowdfunding can also be a great way to gather feedback and build an early customer base. Here are two of the most common types of crowdfunding:
-Reward-based crowdfunding platforms like Kickstarter and IndieGoGo are a great way to get an early-stage project funded through a powerful product pitch without giving away equity in your business. Instead, individuals can donate money in return for a non-financial reward, such as goods or services, at a later stage. This is one of the most common types of crowdfunding among startups.
-Equity crowdfunding through sites like Crowdcube and Seedrs allows businesses to raise investment in return for a share in the ownership of the business.
Grant funding
This option doesn’t require taking on debt or giving away equity and can cover a range of awards – from saving money on premises and business rates to buying machinery or IT equipment. While there are often lots of grants available, they might not be available to all businesses, the application process can be long, and there may be restrictions on what you can use the funding for. It’s always worth checking to see if there’s anything that would suit your business, however. A lot of small business grants are awarded to help launch a startup, generate jobs, and stimulate the economy. Take a look at the Government’s ‘Find A Grant’ service.
Bootstrapping
You can also fund the business yourself by keeping costs low, using personal savings or operating revenue, and looking for other creative ways to do more with less. This is sometimes referred to as bootstrapping. Bootstrapping doesn’t involve seeking external investment or raising capital – which means you won’t have to pay interest or share any equity – and allows you to maintain more control of your business. GoPro, Facebook, and Amazon are examples of companies with humble beginnings and bootstrapped starts.
Friends and family
Of course, some fortunate founders may have friends and family in their networks who will be able to support or invest in their business idea. If raising money from friends and family is an option, either as a loan or as an investment, it can be a way of funding that enables you to work out flexible terms for repayment, as well as acting as a positive springboard for future investment – showing that you have a supportive network willing to invest in your product looks fantastic to investors. If you’re considering this option, it’s important to talk through what the expectations are on both sides, so that you can avoid disagreements and ill-feeling down the line.
I hope these suggestions have helped you to zero in on the best options for your new venture. Remember, there are lots of useful resources out there, like this free-to-attend online event, hosted by Virgin StartUp, where you’ll be able to dig a little deeper into the kinds of financial support available to you.
Need help with anything else in your business? Feel free to book a free 121 consultation with one of my team here, or drop me an email at: ami@growlondonlocal.london.
Aminata Diaby, Head of Business Support at Grow London Local
