We all need a little help now and then, especially when it comes to building your own business from an idea to a successful brand. Entrepreneurship can feel like a lonely road to walk sometimes, and it’s all too easy to feel overwhelmed, but it’s useful to know about the many options available to you when it comes to business funding .
So, if you’re on the hunt for funding options to inject into your start-up, we’ve got you covered. Let’s take a look at why businesses need funding and what some of the best options out there for small business owners.
Why do businesses need finance?
There can be a number of drivers that lie behind an organisation’s quest for funding. It could be covering the cost of premises, staffing costs and business overheads in the first few months while trading gets up to speed. Many businesses also seek finance to accelerate growth – helping them to get to where they want to be much quicker than they would if they simply relied on organic growth. Other reasons include:
- Taking advantage of new opportunities
- Handling unexpected expenses and risks
- Facilitating strategic decision making
- Facilitating innovation and competitiveness
- Ensuring financial stability
What are the business funding options available?
Bootstrapping
The simplest but not necessarily the easiest form of business funding is bootstrapping. Bootstrapping involves being self-sufficient and using your own savings and revenue to fund your business. If you can afford it, this gives you full control over your business without any obligations to external parties but it obviously requires you to have a decent chunk of cash in the bank and an awareness that some elements of the organisational to-do list may need to wait until turnover begins to grow.
Equity Finance
Equity finance comes in a range of different formats. These include:
- Angel investors Angel investors bring a lot of valuable industry insight, expertise and contacts to your business, providing capital for start-ups in exchange for convertible debt or equity ownership. They can also act as mentors to the entrepreneurs they back, so can be a positive addition to your organisation. However, you’ll need to make sure you find the right fit before signing any agreements.
- Venture capital Venture capital, or VC, is private equity investment. In order words, VC firms offer funding to early-stage start-ups with a lot of potential in exchange for equity. VCs seek out businesses they believe can grow, looking for scalable business models. As you’d expect, securing VC funding can be a competitive game and it’s important to be prepared for tough questions from those with the deep pockets. However, the resources and support they offer can be a gamechanger if your business plan and vision for the future is robust enough to withstand close scrutiny.
Crowdfunding
The digital age has made crowdfunding much more accessible, thanks to online platforms like Kickstarter and Indiegogo. Crowdfunding involves seeking small amounts of money from a large number of people, building up a significant cash reserve over time. This can help spread the word of your business idea and create a community of supporters before you’ve even found your feet. However, successful crowdfunding campaigns require a lot of work, both in terms of marketing and outreach; it requires you to convince the public that your business is worth creating.
Crowdfunding also comes in a number of different forms. These include:
- Equity crowdfunding – investors receive equity shares in exchange for their contribution
- Donation-based crowdfunding – people donate money without expecting any return (typically utilised by charities)
- Rewards-based crowdfunding – instead of equity shares, individuals receive non-financial rewards such as products, services or perks associated with the business
- Debt crowdfunding – individuals lend money to businesses with the expectation that repayments will be made with additional interest on top. This provides an alternative to traditional bank loans.
Business Funding with a Start-up Loan
Loans are widely available to start-ups, allowing you to access capital without diluting ownership. However, they do come with interest payments and obligations to repay, so you’ll need to make sure you’re in a position to meet these terms. If so, a small business loan can be a fantastic option to help your organisation get started.
Start-up Loans are low-interest loans, which require applicants to provide a detailed business plan and outline when, where and how they intend to allocate funding.
Since the programme first began in 2013, we have seen hundreds of businesses go from strength to strength following receipt of a Start-up loan. Many of those businesses go on to receive invaluable additional exposure through our wider network.
The Start-up Loan can be accessed in conjunction with all of our programmes, enabling businesses to more rapidly expand and even take on staff from day one. If you’re contemplating taking on a Start Up Loan or business loan of any kind, get in touch to ask for a one-to-one with our business advisors.
TEDCO Business Support has a range of support options available to help you start, grow and fund your start-up, from loans to learning. We also deliver workshops designed to help you understand your finance needs and how to apply for the right funding opportunities. Learn more here.