Being your own boss, earning more money, and being a driving or innovating force in your chosen industry – there are all sorts of professional and personal reasons why start-ups make sense. Whatever business it may be, if you have an excellent idea for a start-up, then getting it off the ground is probably your chief concern. But how can you fund your business idea? What options are available?
Fund it personally
The most obvious funding option open to entrepreneurs is to pay out of their own pocket. It’s a popular method of getting the cash needed to start a business from scratch, and for good reason.
Using your own money means that you’ll have complete control over spending, and it will always be done through a value-for-money lens. Once you’ve got the capital together, you’ll be ready to start building the company (as opposed to spending time during the long process of acquiring funding) and you’ll be able to grow it at your own pace, not one that’s dictated by investors.
Perhaps most importantly, you’ll also have the fear of losing your money in the back of your mind – there are few things that inspire action more than this!
Friends and family
With benefits similar to self-financing, enrolling your friends and family as investors is a fair means of financing, but there are definite caveats to be aware of.
The biggest is that you need to be able to persuade the people you care about most that they’ll at least get their money back. If the business flops and you lose their cash, the relationship between you and your investors will be strained to say the least. Therefore, you’ll need to get your market research down to a tee.
Legal agreements can certainly help ameliorate any issues, but some people (entrepreneurs and family members in kind) might not feel comfortable putting a business spin on their personal relationships.
Approach a bank
Getting start-up funding from a bank used to be pretty easy, but unfortunately, due to the effects of the recession, banks’ purse strings are a fair bit tighter than they were in 2007. Once-straightforward application processes have been replaced by far more complicated ones that feature very rigorous guidelines to ensure that repayments are met.
That’s not to say that business funding isn’t available; it just means you’ll have to work pretty hard in order to get it. Remortgaging your home could be a possibility, but this is a risky choice.
Venture capitalists, angel investor groups and so on are great possibilities when it comes to finding financing, but you’ll need to work hard in finding a person or organisation that fits your business idea and have a solid business plan to sell to them. In the case of the latter, the Angel Investment Network is a good place to start.
With high-worth investors behind you, you’ll be able to draw on their experience and expertise – useful for first-time entrepreneurs who lack business acumen – but in return you’ll have to cede away a percentage of the profits.
Crowdfunding websites such as Kickstarter have revolutionised the way in which businesses are financed across the world, particularly in the UK and US. With the crowdfunding model, members of the public pledge money to a particular project, product or business idea, usually in return for preorders or rewards.
If you’ve invented a new product or have come up with an attention-grabbing, mind-capturing business idea, crowdfunding is one of the best ways to get the money you need – just be careful that you don’t invoke the ire of the online community that decides to fund you.
Pitch to the government
The government operates a number of schemes – finance, loans, grants, business services and other funding options – that aim to boost entrepreneurship and economic growth within certain sectors in need of investment. To check if your potential business falls under the remit of one of these schemes, click here to use the government’s search tool.
While working for a company can afford you a good future, if you want to unlock huge levels of success, launching a start-up is the way to do it – good luck!