6 Funding Options for Start-ups
By
Miles Partridge
In an ideal world, every entrepreneur would have a stash of savings ready to make their vision a reality. In the real world, however, funding is a challenge for most. Starting a business often requires a large upfront investment to get the operation up and running, followed by continuous overhead costs to meet. This is all expenditure which needs to be met without much in the way of income. However, there are funding options available to help entrepreneurs for this very reason. If you are looking for a way to kickstart your startup, here are 6 possible funding options to consider.
Family and/or Friends
A lot of entrepreneurs seek the support of friends or family when financing the early stages of their business. For example, this kind of funding can be useful when trying to test the water of a business model before committing to a formal loan with high-interest rates. This is obviously a quick source of funding with more generous repayment terms and could even be beneficial for the lender if you include interest in your repayments. It’s important to note, however, that mixing money and family/friends can cause a lot of problems should the venture go wrong.
Bank Loan
While they are not the most straightforward source of funding, many do turn to banks for a start-up loan. You will need to submit a formal application and business plan to show that your business is viable which can take a long time. Take care to check the repayment terms and interest rates on any loans and bear in mind that your credit score will impact how likely you are to be granted the loan.
Personal Loan
In some cases, a personal loan may be a viable option as you won’t need to include a business plan with your application. However, a common obstacle here is the issue of having a poor credit score. If this is the case for you, an instant guarantor loan may be a more suitable option. These loans are secured because somebody close to you who has a good credit score agrees to repay your loan if you do not or cannot. This is a much quicker way to source funding.
Crowdfunding
You may be able to raise capital for your start-up through a crowdfunding website. You create a page that outlines how much you need to raise, what you will do with the money and why others should support the project. If members of the public are impressed, they can choose to lend you some money or buy a stake in the business. People tend to contribute money in small amounts so this can take a long time.
Angel Investor or Venture Capitalist
In some cases, it may be possible to find an angel investor or venture capitalist who is someone with the money and experience to help you launch your business. The downside is that you will need to sacrifice shares in your business as well as relinquish some control.
Research and Development Grants
Depending on the type of business you want to start, you may be eligible to apply for a government grant to help you. You don’t need to pay the money back, but these grants are restricted to specific industries.
