Exploring Funding Available For Startups

So you want to start a business, but lack of funding is making it near impossible to start to build or grow it. Funding a startup can be very hard.The idea of going to a bank and asking for a loan is scary (but often necessary) and your friends and family aren’t willing to lend any money at this stage… So what do you do? Whether it’s investment or some form of start-up loan, we will cover the basics of each below to help you make an informed decision.

Keep Your Day Job

If you currently have a day job, keep it! In the early stages of a startup it’s vital that you keep income coming in. There is a chance your business could go either way so by keeping your day job, you need not worry about any bills that you may not be able to pay and can reserve your stress for building your business 😉 Currently 90% of businesses in the USA are self-funded.

Crowdfunding

If you have a unique idea that you think thousands will want, why not test the waters without any upfront cost and start crowdfunding? Crowdfunding is where the general public make donations (also known as pledges) of their time/services of money for a product they want to see made and in return get early access/a t-shirt/free stuff. Crowdfunding also allows you to see if your product will be a hit with the public and also generates free word of mouth marketing – win-win, right?

You must work out how much it will cost to get the MVP (minimum viable product) including cost of outsourcing and materials, the list goes on – but you must try to be as accurate as possible for what you ask.Seedrs

Seedrs
Kickstarter
Crowdfunder
Crowdcube
IndieGogo
GoFundMe

Take Out A Mortgage Against A Personal Asset

Although banks are scary, remortgaging can actually work out cheaper than a lot of business loans, and many startups get rejected due as they are in such early stages. If you have brought your own house, considering remortgaging and feeding the money to the business. This process can take a while and can cause financial problems if your business does fail, I would only recommend doing this if you are SURE that your business is going to generate a return or if you have something to fall back on (ie a job).

Start Up Loan

Start Up Loans is a government initiative that allows you to take a loan of up to £25,000 and is specifically for startups, so no hefty interest rate. You can get free access to a mentor and some providers even organise events so you can network with other startups and potential investors. There is also some awesome offers that businesses get through Start Up Loans like free business banking for two years, reduction in PayPal fees… The list goes on!

Bank Loan

Getting a bank loan is often not viable for startups as there is no proven track record for the business and many get rejected. However, if you do plan to go down this route make sure you have a solid business plan and cash flow forecast, as lenders will want to see this. A credit check will be performed before acceptance, so if you have a bad credit score you may want to consider having a partnering director. With a bank loan, you have set payment dates so you can be prepared for this each month but interest rates are usually sky high, so make sure you shop around before settling on one bank.

Get A Grant

Grants are funds that you don’t have to pay back, unlike a loan. Grants also allow you to keep 100% control of your business. The downside is that grants are often hard to come by as they are awarded for specific projects and there is a lot of competition to acquire them, so don’t count your chickens once you’ve sent off the application. When applying for grants, keep previous applications (with questions) saved as it can save time if two different places ask the same questions.
Many grants also require that you put up some of the money. For instance, they give you £1000 and you must put in another £1000. Although this can be hard for some to do, if you have savings this could be a great way to utilise them and pretty much double your money for nothing.

J4BGrants
Entrepreneur Handbook
Business Finance Support Finder
Idox Grant Finder

Accelerators or Incubators

These are usually groups of experienced entrepreneurs that invest in your idea and give you the means to make it grow, ie guidance, office space, contacts to other investors and sometimes publicity (depends on the incubator/accelerator). Although these can be great ways to grow your company and can give you credibility, more often than not they take a large portion of your companies equity – check with them first before you apply. Luckily for you guys, London is the European capital of accelerators and incubators, below are some links to lists of them in the UK.

London Accelerators & Incubators
UK Accelerators & Incubators
European Accelerators & Incubators

Angel Investment

Providing you can find the correct investor for you company, angel investment is usually the quickest route for funding a startup. For amounts usually between £10,000 and £100,000, angel investors will effectively buy into your company which gives you the funding you need to grow. Angels usually have experience and contacts within the industry they are investing in and these can also help you grow. Often, business angels also become brand ambassadors and can later go on to become a CEO. The downside is, sometimes to make more money the investor(s) will urge you to sell your company or at least buy back your equity, but this depends on the company and investor. If you’re new to angel investment, some may take advantage of you as a newbie and may try to change the direction of your business. I recommend getting an advisor to make sure there are no mishaps.

If you do not want to part with equity in your business, this is not the right choice for you.

Venture Giant
Angel Investment Network
Angels Den
Angel CoFund
Angel Investment FAQ

Save Money Where Possible

Cut all overheads that you can. Fish through the subscriptions you have and unsubscribe from any you haven’t used within a month as this can mount up. Avoid purchasing expensive things you don’t need as these are just business assets sitting there gathering dust, find a cheaper version that does the job just as well.

Consider joining a coworking space to minimise office costs like internet, printing, desks, chairs etc as all of these come included. Plus, at a coworking space you have the chance to collaborate with other members, maybe a trade of services!