Entrepreneurship has been hailed as the pathway to self-actualization and making a real contribution to society through product creation, development, and marketing. That said, setting up a business can be a costly affair. Almost every activity from registering your business, you can do this via a company formations agent, to equipping your premises to promoting your products and brand, has a cost attached to it.
Access to financing is therefore one of the priority areas that you have to explore as you start your business. There are various options to factor in when seeking reliable financing for your new business venture.
Personal Savings
Putting down your personal savings to fund the beginning stages of your start-up is often seen as a vote of confidence in your business and a sign of commitment.
If you are going into full-time business, personal savings can help you smooth the transition into self-employment by giving you the much-needed financial support. Depending on your cost structure and prioritization, you may also choose to allocate personal savings to the acquisition of equipment.
Much like any other mode of financing, there is an element of risk in using your savings. If something was to go wrong, you could end up significantly exposed or even insolvent.
Investor Financing
Based on how attractive and commercially viable your concept is and the projected returns, you may get investors to buy a stake in your business.
The investors may include family, friends, angel investors, investment bankers, and many more. Depending on your business niche, you can get fund managers who are always on the lookout for businesses to back so as to generate decent returns for their clients.
The amount of investment funding you require depends on your growth projections and the strategic goals you want to achieve. You can use this funding to establish your business or stimulate growth.
Securing this form of investment can be an uphill task especially if you operate in a sector with few investment opportunities or one that traditionally doesn’t attract investment funding.
Business Loans
Mainstream banks and micro-lending institutions offer support to start-ups in form of small business loans to get them off the ground. Repayment arrangements for these loans are often simple. The loans may be paid off through periodical direct debts from your account or tied to transactions.
Bank and micro-lending facilities can be difficult to access especially for start-ups. This is because of inadequate security, financial history, and relatively higher rates of interest charged.
Government Funding
In a bid to create an ecosystem in which small businesses thrive, the government provides access to tailored financial solutions aimed at developing start-ups and small businesses.
You can get start-up loans from as little as £500 all the way to £25,000. Whether you are looking for finances to get established or to help you cover the initial costs of equipment purchase or leasing, government funding can get your business ready for trading.
Apart from loans, there are start-up grants businesses can apply for. Due to the fact that they are non-repayable, these grants attract a lot of applicants which means fierce competition and hence no guarantee that you can secure funding.
There are many grants differentiated according to the goals they are designed to achieve. There are grant schemes that fund training or encourage businesses to take on apprentices. You may also find grants designed to promote growth or help businesses with building repair.
One of the major drawbacks with grants is that they are limited by sector, location, or size of the targeted businesses.
Crowdfunding
This is an excellent option if you want to launch a new product and bring it to market. There are various crowdfunding platforms such as Kickstarter and GoFundMe that allow the public to back or donate to a project and in return gain specialized rewards or early access to the product(s).
To succeed in crowdfunding, you should start with the end goal in mind. Before you launch; test, refine, and perfect your proposal messaging. Be laser focused on the amount of money you require to bring your product to life and probably mass production.
The downside to crowdfunding is that if your event doesn’t attain its goal, you miss out on the funding completely. However, it is worth trying if you strongly feel that your product once brought to market will deliver on your campaign promises.
FSB and Its Role in Business Funding
The Federation of Small Businesses (FSB) is a UK subscription-based business organization formed in 1974 to represent small and medium-sized businesses. The organization offers its members vital business services to help them achieve their ambitions. It has 3 main packages: Business Essentials, Business Creation, and FSB Connect.
The Business Creation package is specially designed to simplify the process of setting up a business. This package gives support and advice to new start-ups on a wide range of issues including company formation, insurance services, payment services, and networking support.
On the financing front, FSB cash advance can help you raise business financing risk-free without tying up your assets as security.