We look at the best ways to obtain funding for your small business venture.
1. Forward profit generation
This is the most widespread and safest way of funding a business venture.Simply you sell something, make a profit, keep the profit in the business and use the profit to fund the next phase of the business. This should help to ensure that your business is always profitable. It means that your business cannot easy over expand and that growth is controlled.
It is low risk and means that if you business fails, you do not end up losing your house. It also means that you do whatever you can to keep your overheads as low as you possibly can.
Many people use part or all of their savings to keep them going. Money put aside as savings is a very good way of financing your business. However, it is good to note that this takes great dedication and self control.
3. Redundancy payment
Many people use their redundancy cheque to fund their business. During a time of global economic crunch and meltdown where many people loose their jobs daily, this could be a very good idea.
4. Credit Card
The credit card represents one of the fastest ways to fund your business venture for the new computer or buying stock. You have between 28 and 42 days interest free which you can use to manage cash flow. Try to avoid interest charges as the interest rate can be crippling.
5. Family, Friends and Fools
The classic way of funding a small business was from Family, Friends or Fools.
Of the three, family is often a good way to help you get going. They can help with the early phase and tend to require only a high level overview of the business.
6. Second Job.
You have another job, or your partner has a job which supports you financially while your business gets up and running. The obvious downside is that if you are working, you will not be able to devote all of your time to the new business, but is one avenue that many small business owners are forced to face.
7 Bank Loan
Bank loans are a very widespread way of getting your business going. These could take the form of either a personal loan or a business loan. In many ways these amount to the same thing as most business loans require that you put up some personal security (often your house or business premises) before they will lend to you. Though it is very widespread, the bank loan is personally my second least favourite option.
8 Business Angels
Business Angels are wealthy individuals who can invest in your business. These can be the types of people that you see in the Dragons Den TV show. They can often offer reasonable levels of business help. However once they have a financial stake they can tend to interfere in your business plans and take valuable time to manage. Typical investment levels can be around £120,000. To benefit from such people, you need to be very knowledgeable about everything you do and be able match their level of intelligence. A good tip is to anticipate the sort of questions they will ask before meeting with such individuals.
9. Princes Trust
The Prince’s Trust Business Programme provides money and support to help people start up in business.
10. Government Business Grants
This is the least favourite of all my ways of funding your business. Bodies like Business Link claim that they can help you access small business grants, which on the face of it sound like free money. The problem is that they can be almost impossible to obtain, can take up lots of valuable time taking you up a dead end, and then only provide you with half of the money that you require.
Speak to professionals: Colin: Enterprise Business Centre, 01224-418888 or email firstname.lastname@example.org
A government backed scheme if you are unable to obtain a conventional loan because you do not have assets to offer as security. The Small Firms Loan Guarantee (SFLG) helps to overcome this by providing lenders with a government guarantee against default in certain circumstances.
The main features of the scheme are:
What has been your experiences of financing your business? Leave your comments in the box below.