Your guide to finding a financial jumpstart

The world of business finance and funding can feel overwhelming, especially if you’re just starting out as a new business owner. Whether you’ve just had a brilliant idea and you want to know how to make it a reality, you’re in the early stages of starting out and need a boost, or you’re looking to take your small business to the next level, there are a huge array of options out there.

Knowing whether you should focus on finding investors, securing grants, entering competitions or exploring different kinds of loans can be a daunting choice. There are as many startup funding options out there as there are types of business. Nonetheless, there are some key avenues that are worth exploring, and here we’ve rounded up some of the more tried and tested ones which you should consider exploring.

Angel Investment Network

Angel Investment Network is kind of like LinkedIn for startups, helping to connect them to a network of individual investors. Angel investors are private backers that tend to offer smaller amounts of money than venture capitalists, but also ask for a lower return rate. Angel investment can be an excellent way to fund your business if you find the right backer – one who you can share your vision with and who trusts you with their investment.

Startup Funding Club

The Startup Funding Club does what it says on the tin, offering early stage investment to startups in the UK. It combines syndicate Angel investment with their own seed investment funds, and offers their Angel investors the possibility to invest directly in specific startups, or to split their money between a portfolio of different businesses. This approach means successful businesses have a greater chance of meeting their total funding needs, and can make use of the expertise of a highly experienced network. Check if you meet their criteria here.

Hatch

If you are looking to move in to your first bricks-and-mortar retail space, or to expand from your first location, then the Hatch initiative might be for you. Set up by retail property network Revo, Hatch partners winning businesses with landlords, who will provide them with rent and bills-free retail space for three months to help them get going. Winners also receive marketing advice from industry experts, as well as a year of membership to the British Independent Retailers Association, which includes an insurance scheme, card processing and legal advice.

Crowdfunding

If your business is already established, but needs a cash injection for something tangible like a scaling up of production or investment in new equipment, crowdfunding can be a great route to take. Rewards-based funding is aimed at more casual investors – usually existing customers – offering rewards like a free t-shirt, or one free coffee a week for a year, in order to make them feel like investing is worthwhile.

If you have a loyal customer base who is already emotionally invested in the business, it won’t be hard to get their support through small financial contributions. Another option is Equity Crowdfunding, which enables groups of investors to fund new businesses in return for a portion of equity in the business. This avenue is for businesses looking to raise much bigger sums of money, and can be a good way to raise funds very quickly.

Business competitions

Don’t worry, we’re not advising you go on The Apprentice, but more formal competitions are a great way of securing funding with fewer strings attached. There are a number of competitions out there (such as those listed here), often sponsored by businesses looking to support newcomers in their own sector, which usually offer a combination of financial support and expert mentorship.

Think about what categories your own business falls into, and get searching for competitions looking to nurture growth in those areas – just be prepared to present an airtight business strategy.

Local & national government funds

There are a number of local and national government funding options available, depending on your region and your business sector. As a starting point, check out those listed here. It’s definitely worth exploring these in detail as government funding is most often in the form of grants, and many businesses aren’t aware that these support opportunities are out there.

It may take some time and research to figure out which funds you are eligible to apply for, but it’s time well spent. The government also offers Startup Loans at a fixed interest rate of 6%, with no fees, for anywhere between £500 and £250,000.

Business loans

Another option is of course to go direct to the bank, and there are a number of private business loan options available (such as those listed here). Many bigger banks offer startup loans for launching a business, short-term loans to help with more immediate cash issues, or long-term loans designed to help with a sustained expansion.

Applying for a business loan through a bank can be a more lengthy process, as they have a very thorough vetting process which includes looking through detailed business plans and company accounts. Bank loans will also usually have less generous repayment terms and interest rates than the government loans available. Finally, be sure to think carefully about whether you want to opt for a secured (using company assets as security) or unsecured (protection from business assets being used as security) loan.

Venture capital funds

Venture capital funds manage the money of investors looking to capitalise on the strong growth potential of startups, and they provide small or new businesses with funding in exchange for equity in the company. VC funding is high-risk for investors, who usually look for a return and exit from their investment within five to ten years.

While approaching VC funds can be a great way to receive a large injection of cash, and often the expertise of some investors, it can also have a big impact on the direction of the business. VC funds will often expect representation on a company’s board, or other equivalent levels of control or influence over the business, so it is vital that you find a fund whose vision aligns with yours.

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