When you’re thinking of starting a business, it’s easy to get swept up in the grand drama and ambition of it all. You’re finally about to realize your dreams, after all, and that’s not something that many people get to do! However, if you do get carried away, then it’s possible to lose sight of the minutiae, and in doing so, you could be seriously hamstringing your ability to get your business off the ground.
Of those minutiae, one of the most important is acquiring funding. It’s a sad reality that everything you want to do as a business owner is going to require money, and you’re going to have to find that money from somewhere. Luckily, there are plenty of ways to get business funding out there, and they’re not all difficult, either. Here is our beginner’s guide to the different types of business funding and how you might acquire them!
Personal funding
Many prospective business owners turn to personal funding when it’s time to get some cash to start a business. This could come in the form of savings, for example, or you might decide to turn to friends and family and ask if they’d like to be partners in your new business. Even online loans can be a good way of funding your new enterprise; if you only need a little extra cash to push you over the edge, for example, or if you’re not planning to hire premises or staff initially. Turning to personal funding could be a solid, obligation-free way to fund a business.
Business loans
Naturally, another common way that many people fund businesses is to apply for business loans. Depending on where you are in the world, the process for doing this might be different. In the UK, there are many different providers that offer startup loans, including the government itself, which could give you up to £25,000 to start your first business. Of course, you’ll need to work out a repayment plan with your provider, and you may or may not be eligible for the loan depending on whether you fulfill the criteria set out by the lender.
Angel investment
If you’ve ever seen shows like Dragon’s Den, then you understand the basic concept behind angel investment (although there are some differences). Angel investors have money to invest, and they want to invest it in a business that’s going to give them a good return. As such, they’re always on the lookout for new businesses that have strong ideas, solid plans, and confident entrepreneurs at their helm. Angel investors will often want input in how the business is run, though, so if you want to retain absolute control over your enterprise, this may not be the route for you.
Partnerships
Teaming up with someone else in order to share the responsibilities of the business can be a solid route for financing. If you know someone who’s always wanted to start a business – preferably someone who has complementary skills to yours – and they have money to burn, then approaching them to become a partner in your business should be on your agenda. Be aware, of course, that a business partner is not just an investor; they’re an equal part of the business, and they’re going to want a say in major and minor decisions alike. Be sure to be in constant communication with your partner so you know what they want.
Venture capital
In essence, venture capital refers to investors who want to invest in high-growth startups in return for equity. Venture capitalists are often experts in their field, so they’ll also provide their knowledge and expertise in helping you to set up the business and ensure that it becomes profitable. You might recognize some of the businesses that have benefited from venture capital investment; big firms like Spotify and Pizza Express have turned to this avenue in order to secure funding. If you think your idea has huge growth potential, you may want to approach some venture capitalists.
Crowdfunding
This is a relatively new way to fund a business, but it could work for you depending on what kind of business you’re looking to start. Crowdfunding is the right option for businesses that have a clear, obvious benefit for the public or for their customers. It might not be a great option if you can’t immediately state why people should trust your business or what’s in it for them, but it has worked for businesses in the past. Oculus, Peloton, and Bluetooth keyring device Tile are all examples of businesses that were crowdfunded and went on to achieve huge success.
Grants
Depending on the kind of business you’re planning to start, you may be eligible for business grants, which are often given to businesses that can demonstrate a real public benefit. Grants are quite hard to acquire, so you may find that it’s not worth exploring this particular funding avenue, but if you do, they’re effectively free money, so there’s no reason not to at least research whether your business could be eligible or not. There are plenty in the UK alone, so it’s worth looking into your country’s situation and finding out whether or not there are any business grants available to take the edge off your funding campaign a little.
As you can see, there are lots of ways to fund your small business. Raising the necessary funding doesn’t need to be painful, so make sure this is one item on your checklist you don’t overlook!