4 ways to raise £100,000 to start your on-line business31 May 2005
If you're thinking about starting a business, probably the most daunting part of the process is finding the money to turn your dream into reality.
Here we look at 4 ways to help you find the capital you need:
Use your own money
If you're starting a business on your own the first place you need to look is your own personal finances.
- Do you have any savings tucked away?
- Do you have any pension or redundancy payments you could use?
- Do you have any capital tied up in your home?
Be careful when using any of your personal debt to finance a business venture. Make sure that you're not risking your home, your family or your future for your business.
Bank loans & other institutional debt
The way banks decide whether to lend money to a start-up is based on your business plan. Spend time making sure that you've covered every eventuality. Have a fallback plan in case things start to go wrong.
If you're starting a business from scratch, you may be expected to secure the loan on your personal property. This becomes a personal loan for business purposes rather than a business loan.
If you secure any debt on the company's assets, this is called a debenture. Read any documentation about signing a debenture very carefully. The lender may be able to force the company into insolvency to recover the debt.
You could explore other institutional debt such as your bank overdraft or your credit cards but be very careful when using too much of your own debt.
Venture capital, grants & business angels
You might want to consider talking to a venture capital company or a Business Angel about getting them to invest in your idea, but they will expect a fairly substantial stake in your company in return for their investment.
The benefit of using venture capital or a Business Angel is the experience and advice that they can bring to your business. If they've got a stake in your company they are more likely to be able to help if and when things start to go wrong.
The Prince's Trust provides some grants to those under 35 years old for starting a business. Also look at www.chamberonline.co.uk and www.startups.co.uk for more information about this type of funding.
Leasing
Leasing could save your business a lot of money in its first few years.
Leasing is basically borrowing the equipment and machinery you need to get your business going, without having to find the lump sum required to purchase it outright. You can lease just about anything, from fixtures and fittings for a new bar or restaurant to computers, office furniture, manufacturing machinery or commercial vehicles.
Leasing your business equipment (often referred to as Asset Finance) could help save you ongoing costs such as maintenance and repairs or upgrades.
If you believe you have a good idea then make something of it. Don't be knocked back if you can't find the funds you need immediately, there will always be another option open to you.
