Lack of cash can be one of the biggest obstacles to starting a business. So in this report, we’ll look at some of the main ways of raising the money to start a small business – including some little known ideas you might not have thought of!
6 Ways to raise the money to start a small business
* Use your own funds! You might not have realised, but this is the very best source of funding for a new business. You don’t have to get anyone else’s permission to borrow it, nor pay an inflated rate of interest. Added to which, if you’re investing your own money, other sources of finance are more likely to say yes too.
* Borrow from a bank. The conventional way of raising money for your start up. Although banks have received a lot of bad press for not lending to businesses of late unsecured finance of up to £10,000 to start a small business is still readily available from most of them.
If you’re considering this method be sure to shop around for the best interest rate. Also check for hidden arrangement fees which can add to the cost. As with any kind of borrowing do your homework to make sure you can afford the repayments – even assuming your lowest estimate of business turnover.
* Use asset finance. Hire purchasing or leasing assets such as equipment, machinery or vehicles is a way of borrowing money to start a business by another name. It saves what capital you do have to invest in other things. Added to which it’s usually easier and cheaper to obtain than an outright loan.
* Borrow from friends or relatives. In these tricky economic times this shouldn’t be overlooked, especially if you have friends and relatives with cash that’s earning next to nothing in interest in a savings account.
If you’re worried about asking friends and relatives for help there’s no reason why you can’t make it a proper business arrangement that will benefit everyone if you want to. Have a written agreement to make repayments and pay them interest – or even offer them a share in your business. They’ll earn more than their savings will get in the bank and you’ll get good value finance.
* Find a sleeping partner. Sleeping partners are people who put money into your business but don’t have any involvement in running it. One way to find a sleeping partner is to go through a business angel’s network. The British Business Angels Association (BBAA) website at http://www.bbaa.org.uk has more information on these networks.
Some canny entrepreneurs have even found sleeping partners by advertising in the press, or setting up a website appealing for investment! There’s even at least one website where you can advertise your business proposition and invite partners with money available to invest in you. It’s called Crowdcube, more details here: http://www.crowdcube.com
* Apply for a grant. It is well worth investigating what grants might be available to you. Several government departments and also some charities give out grants to help businesses small and large start or expand. You can get grants to help with research and development, employment and training, environmental improvements and capital investment to mention just a few. And many grants don’t have to be paid back. Business Link is a good place to start researching grants: http://www.businesslink.gov.uk