Any small business owners trying to grow their firm will know that you need to put some money in before you can start making anything back. In other words, you’re going to need a source of funding. Whether you need money for developing your product, raising public awareness or growing your team, there are plenty of different options for raising some cash.
Some people are lucky enough to get investment from their loved ones, and if you have friends or family with some spare money to invest then you could consider bringing them on board.
This kind of investment can be good for somebody in the early stages of starting a new business, but we recommend proceeding with caution. It’s easy to misunderstand your loved ones’ intentions (is the money intended as a gift or a loan?) and that can lead to embarrassment or even legal trouble later down the line. That’s why it’s important to draw up formal paperwork, treating your nearest and dearest the same way that you would anyone else who offered you money.
One of the more conventional ways of funding a small business, taking a bank loan can really help you hit the ground running. It does require some hard work first, though, as no bank is going to hand over the cash without a little due diligence. To prepare properly, you’ll need:
- A clear and concise business plan
- Information about how you intend to use the money you’re borrowing
- A repayment plan
The bank will also be looking for evidence that you have the skills needed to make your business work. You can demonstrate this by talking about your previous experience, and by showing that you know your business plan inside and out.
Government start up loans
The government back a scheme which makes money available for people looking to start or grow a business. They offer up to £25,000 (although average amounts taken are much lower), and as with a bank loan you’ll be expected to provide a clear and workable business plan. These are offered as unsecured personal loans, which means that you don’t need to offer up collateral such as your home in order to secure it. You’ll be asked to make monthly repayments at a 6% interest rate. Learn more here.
You could also look to the public for money to finance your grand plans. Crowdfunding works by taking small amounts of money from a large group of people – but you’ll need to offer something good in return. This could mean giving exclusive access to your product, as people do on sites like Kickstarter, or giving your crowdfunders equity in the business. A good example of a company that has used crowdfunding to grow their business is Brewdog, whose Equity for Punks scheme lets any member of the public invest in return for shares.
Remember, none of this is tailored financial advice – so if you’re concerned about running your small business, look for expert help. However, we hope that we’ve given you a good overview of the different options so that you can feel more confident about getting your business off the ground.
If you are looking for a business or sole trader bank account check out our comparison tables and reviews here.