Part 5: Need investment for your business?

Need investment for your business?

Here's where to start...

In part 5 of our guides for new businesses, we turn our attention to how to get funding and therefore turn your idea into a money-making enterprise.

When you're in the start up phase, there'll usually be a period of time that demands a lot of effort and money before you make a profit. To give your business concept a good foundation, it's important to research your market and ensure that your target audience will pay for your product or service (see guide no. 3 for more information).

If you have confidence in your market, then you can start to explore the different sources of funding. By getting that funding in place, this will then help you with the start up costs of your business.

Here are some sources of funding which you can turn to:

1. Help from a government scheme

Looking for some initial funding to develop your business idea, then you could get help and support from a government-backed scheme. The finance finder tool on the gov.uk website will take you through the various options available to see if you’re eligible for a grant or loan.

2. Ask your bank for a loan

If you can show a bank that there really is a market for your business concept, one funding option is a bank loan. They will ask you for:

  • A realistic cash flow forecast
  • Proof that you can pay back the loan with interest
  • (Maybe) security against your loan, such as your house or car, in case of non-payment. You’ll need to think carefully about how much risk you want to take on before getting a loan.

3. Sell shares in your business

If you’re not eligible for a government grant and you don’t want (or can’t get) a bank loan, it’s not uncommon for start-ups to ask family and friends for investment in the business. This may or may not be a formal arrangement, but if you are looking for additional sources of money to back your growth plan, you can go down the equity funding route and sell shares in your business. Here are some useful links to explore:

  • Business angels (wealthy business people who invest in start ups)
  • Venture capital (companies who invest in businesses that have the potential for fast growth)
  • Crowdfunding (online investment in a business idea by a large group of people) – here’s a link to an article about the top 5 crowdfunding sites in the UK

If you do sell shares, any outside investors will own the company jointly with you and any others that founded the business with you. They will have a say in the running of the company, and are entitled to get a share of the profits (also known as ‘dividends’).

It’s important to get legal advice before selling shares in your business. Go the Law Society website for help in finding a solicitor.

 

Image credit - freepik

facebook
twitter
youtube
linkedin