Ways start-up companies can get funding

Ways start-up companies can get funding

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Date14 Feb 2013
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Posted ByAdmin
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Would-be entrepreneurs considering establishing their own businesses in the Welling area should do thorough research in order secure the funding that is right for them.

Without capital investment, businesses cannot get off the ground, but it is important to not grab the first cash that comes available, as it might not fit an individual's particular needs.

Debt financing through financial institutions is one option and the way in which the lion's share of firms take their first steps in the business world. If a bank believes an applicant has what it takes to run a successful business and there is money to be made, they will approve a loan or credit with a repayment schedule or interest.

To get approval, entrepreneurs will need a thorough business plan and a good understanding of their finances. It may require them to put up assets, such as their home, against the loan, which may be a risk many may not want to take. On the plus side, however, it means individuals do not have to give up equity in their firm.

Financing through equity is when an investor gives cash to a business for an ownership stake, which can range from friends and family who have a bit of capital behind them to big-time investors and venture capitalists. Using rich acquaintances may be the most convenient and with few strings attached, but it can ruin relationships if the business goes wrong. Investors, on the other hand, offer expertise and large amounts of cash, yet may take greater control and shares in the process.

Grants are also available to start-up businesses, providing free help to get an operation going, but they are typically hard to secure and the processes to get them may be stressful and complicated. However, if successful they can prove to be invaluable to an entrepreneur in their early days.  There are many out there and businesses can apply for as many as they like, improving the chance of success.

The government also offers loans worth around £2,500 to young people wanting to start their own business as part of the Department for Business, Innovation and Skills' StartUp Britain campaign. It is available to anyone aged 18 to 30, has a fixed-rate interest of six per cent and must be paid back within five years.