Starting a new business can be an expensive process, with many new business owners struggling to cover unexpected costs. Securing finance for your start up can be difficult, particularly if you have no experience running your own company. But don’t believe all the start up funding myths that you hear.
However, with perseverance and a good business plan, there are plenty of options available. Here are five funding options for your startup.
Crowdfunding platforms, such as Kickstarter, GoFundMe and Seedrs are increasingly popular with first-time business owners looking for financial help to get their business up and running. There are different types of crowdfunding, such as equity and product crowdfunding, so you will need to research the options thoroughly to make sure you understand the terms and conditions. Some crowdfunding schemes act as a loan that will need to be repaid, while others will give investors a stake in your business.
New businesses often seek startup loans from banks and other financial institutions, as they are often considered to be the most trustworthy option. However, in recent years, it has become increasingly difficult to get a new business loan from a bank, particularly an unsecured loan. Most banks require applicants to offer some form of security, such as property or other assets, although this will depend on the amount of money you want to borrow. If you are considering applying for a bank loan, you will need to provide a viable business plan that contains as much detail as possible, including a market research report, marketing plan, product information and financial projections.
Peer to Peer Loans
Peer to peer loans offer competitive interest rates for people looking to start or expand their business. Websites like Funding Circle, Ratesetter and Zopa help to connect borrowers and lenders, although you may have to pay an introduction fee. The website will usually perform a credit check and you will need to prove that you have enough income to cover the repayments. Interest rates vary greatly from one platform to another, so it’s important to research and compare the different platforms available.
Angel investors, also known as seed investors, private investors or business angels, are usually wealthy individuals or sometimes groups that invest money in new or established businesses. Angel investors are great for businesses that need a large amount of money upfront, but you will need to consider the terms and conditions of the investment carefully, as angel investors will hold a stake in your company. You can use networking websites like LinkedIn to find investors, or you can use dedicated websites that help to bring investors and borrowers together.