November 25

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Raising Finances For Your New Business

By Georgia Davis

November 25, 2019


Raising Finances For Your New Start Up

So, you’re considering starting your own business. You’ve calculated all your start up costs and are now scratching your head as to where all this money is supposed to come from to allow you to, well, make money. The following article is a list of all the places new business owners can source different financial support.

Bank overdrafts

Overdrafts are your safety net for finances. They usually want to see some previous turnover or you may have to secure the overdraft against a house.

Cash advances 

Companies such as Business Cash Advance and Credit for Merchants are geared to offering money upfront, before debts and invoices have actually been paid.

Asset-based lending

An asset-based loan works the same way as a mortgage. You borrow money against an existing possession, and, if you can’t meet your obligations, the asset is repossessed. Assets which can be used as collateral include property and premises, accounts receivable, inventory and equipment.

Factoring 

The factoring process allows you to release the money tied up in unpaid invoices, and removes much of the burden of debt management. When you engage a factor, they will take control of your invoices and assume responsibility for processing them. You will be able to draw funds as soon as the invoice has been approved – before the money actually comes in.

Angel investors 

If you manage to impress a business angel, they may provide investment in return for an equity stake. Most angels are seasoned entrepreneurs themselves, so they know what you’re going through and they’re likely to be patient.

Crowdfunding 

Crowdfunding is, essentially, an extension of the charity sponsorship page in the business world. People come together, on crowdfunding sites, to pool money towards a particular venture or idea – it could be ten people putting in £500 each, or 3,000 people each giving £1.

Donors or investors on crowdfunding sites, such as Kickstarter or Crowdcube, are typically private individuals providing small sums, so they’re unlikely to give you the sort of grilling, and rigorous conditions, an angel investor would. You can also scope out the popularity of your idea via a crowdfunding site, and get some crucial word-of-mouth marketing going.

Peer-to-peer loans 

A peer-to-peer exchange site, such as Zopa or Funding Circle, will put you in touch with private lenders, and create a personal relationship between you and the lender – fostering trust and patience.

Micro-loans 

If you only need a very small amount of money, you should think about a micro loan, which is tailored to your circumstances and can be used alongside funding from other sources.

Community schemes 

A plethora of community development finance initiatives, or CDFIs, have been set up around the country to help individuals, and businesses, denied credit by banks and lending companies.

Family loans 

If you want to keep things ultra-simple, a supportive family, with money to spare, can provide a fair, willing and reliable source of loan funding. Relatives and loved ones are more likely to trust you with their money than an outsider, and they will probably demand lower interest and fewer incentives than a commercial organisation.

Any finance model or provider should be researched thoroughly before you make any commitments, to ensure this is the best solution for your business.

If you enjoyed this article, take a look at the following blog posts we have on starting your own business:

  • Becoming an Entrepreneur 
  • Starting Your Own Business: Types of Company
  • Branding Your New Business
  • The Essentials to Starting a New Business

Georgia Davis

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