Funding for startups

The number one factor that inhibits startups from growing is a lack of funding. In fact this is the primary cause of new businesses being unable to open in the first place and can be a crushing blow to many budding entrepreneurs dreams. So, if you have just launched your startup, what are your options and where can you go to get your hands on that all important funding?

Grants

A grant, unlike a loan is not repayable and as you can imagine they are in high demand. However, sometimes the amount of the grant has to be matched and the money must be used for a specific purpose. Availability and eligibility can be determined by where you are based because different local authorities provide various funding options. On a national level more information about grants in Wales are available from The Welsh Government’s Development Bank of Wales website.

 Crowdfunding

Crowdfunding is a popular choice for startups because it acts as a way to raise awareness of their business whilst raising funds, and there are several types to choose from that generally fall into two categories. Firstly, consumer focussed crowdfunding is for product based businesses via several platforms such as Kickstarter and Indiegogo and allows you to generate sales before manufacturing. An added bonus is that because the reward for investors is the actual product you don’t have to give up any shares in your business.

The second category is investor-focussed crowdfunding on platforms including Crowdcube and Seedrs. Here, your investors become shareholders and this is a great choice for non-product based startups and because investors receive equity they are far more likely to invest more than customers would.

Family and friends

This is probably one of the most popular ways of raising funds for startups and it’s not just the bank of mum and dad. Don’t forget that rich auntie and uncle and your cousins too. On a serious note any friends and family that are kind enough to invest should be made fully aware of the risks involved otherwise if the business fails there could be a rift that takes years to heal.

Peer-to-peer (P2P) loans

Startups will usually face difficulty when looking to banks for business loans because the bankers deem startups to be high risk. Therefore, P2P lending which connects eager investors with new businesses, is a viable alternative. There are several lenders to choose from; Funding Circle was the first in the UK and others include Zopa and RateSetter.

Angel Investment

Angel investors are often affluent individuals who provide capital for startups in exchange for equity in the business. They can invest alone or as part of a syndicate and typically ask for quite a large share of the business and expect a high return on their investment within three to seven years. They can use their expertise to help startups evolve and there are numerous angel investment networks across the UK to choose from.

Venture Capital

Venture capital is a form of private equity and a type of financing that investors provide to start-up companies and small businesses that are believed to have long-term growth potential. Raising funds through this method is sometimes avoided because business owners lose control of their business. Startup owners are renowned for having a strong emotional bond to their business and are reluctant to relinquish any control.

Here at Business Butler we have our very own Funding chatbot named Grant who can help you with all manner of funding related queries. Grant will help guide you through the funding options available. To find out more please click here.

To find out more about funding for your business please click here.

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