A lot of people see funding as a major stumbling block in starting a business. This should not necessarily be the case.
The starting point is to create a cash-flow forecast, a list of your start-up costs and a business plan. This is key really, especially if you are not sure where the funds will be coming from. It is also worth considering contacting your local bank, friends and family or a start-up company to discuss you funding options.
Knowing how much money you require to get your business started is an important, as there are different types of funds available with different criteria. So understanding the differences for each will be beneficial before applying.
If you are applying for a loan from a financial institution the typical questions you may be asked by a lender are:
•How much money do you need?
•What will the money be spent on?
• Do you have a business plan and cash flow forecast?
Examples of the different types of funding include:
1. Personal financing: This is usually the first option for most business owners as they use their own money to fund the business. Funds usually come from savings, investments, inheritance etc. This is a popular option as business owners are in control of how much they put in and get back from the business.
2. Friends and family: If you are going to borrow from friends or family member ensure you have a written agreement in place to avoid any disputes. The agreement should contain the general repayment terms of the loan, the monthly repayments including the interest.
3. Start-up companies: There are a number of start-up companies such as Start Up Loans, Virgin Start up and the Princess Trust provide advice, support and funding to small businesses trading under two years. If you have a viable business idea and a business plan you can apply for a loan of between £500 -£25,000 subject to terms and conditions and a credit check. (Please see links at the end of the blog for more information).
4. Banks: There are different lending options available, overdrafts, credit cards, loans and re- mortgaging. Before borrowing it is important to check the terms offered, the interest rates and the repayment options. If you are considering re-mortgaging think it through carefully and seek advice from your mortgage lender as your home may be at risk if you are unable to meet the regular repayments.
5. Credit Unions: Credit unions are usually small, non-profit financial organisations set up by members who have a common bond with each other such as living in the same area, working for the same employer, sharing the same profession or attending the same place of worship. They usually offer loans and a low rate of interest with the option to borrow more if you meet the repayments.
If you require further information and support on different types on funding you can visit the government website for more information.
Here are a few useful links for Start Up companies:
https://www.princes-trust.org.uk/ (For people aged between 18-30)
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The government provides new businesses with access to start-up funding. Start-up loans range from £500 to £25,000 and can help a business get established, covering the initial costs of purchasing equipment and getting ready to begin trading.