The Different Types of Funding Available To Your Business

Getting your business up and running can be one of the biggest challenges you might face as a business owner. Without the right funding then it is likely that your business is not going to take off and it is quite surprising how many businesses fail as a result of this. Therefore, it makes perfect sense to discover the different types of funding that you can take advantage of if you are eligible.

The good news is that there are many different options available and this includes:

• Equity finance

• Venture capitalists

• Angel investors

• Government grants

• Own funds

• European grants

• Banks

• Government-guaranteed lending scheme

• Friends and family

• Commercial finance

• Find business partners

• Stage payments

Some of these are fairly straightforward to understand so we are going to take a look at those that are not as simple to understand.

Angel Investors

This is often an individual who has a history in business and is looking to investment opportunities to invest their money. They will own a share of the business as part of their investment and as a result, they tend to be more hands-on when it comes to running the business. They will call on their expertise and experience to ensure that their investment becomes a success

However, investment from a business angel will only go so far. If you are looking for an investment of several million then this is not the option for you. In general, angel investments will only invest hundreds of thousands of pounds as they commonly have more than one investment.

Venture Capitalists

Some of the biggest businesses in the UK have been born from investments from venture capitalists including the likes of Odeon and Pizza Express. This form of finance is provided for an equity stake in a company that has a high level of growth. As a result, they will often make an investment within three years of starting up and at the early stage of development. Commonly, they will often invest in the likes of Life Sciences, Internet and Clean Technology.

Essentially, they make their investment as a way of funding the development of new products and technologies. They don’t just invest their cash but they bring their expertise and that can help these projects to succeed. It is important to see whether this kind of investment is the right fit for your business but if you are working in the area mentioned and are considered a startup then you might be the right fit.

However, you need to ask questions of investors that show an interest because you need to determine whether they have had success in your sector. 

Friends And Family

You might have looked at the initial list of potential investment options and thought that friends and family was a relatively simple option but that is not always the case. It can bring with it a range of problems that you might want to avoid. After all, you would be asking friends and family to part with their savings and that could leave them worried that their money might be lost. 

Furthermore, they might also feel as though the business should be run in a certain way and that could lead to them interfering, causing more stress and problems. It is quite common for family and friends to experience problems when it comes to investment Therefore, if you do go down this route, it is important that you put a loan agreement in place. 

Government Grants

If you choose to use grants from the UK government then you won’t have to repay them although it is not always an easy task to obtain them due to competition. In most cases, these grants are often awarded for certain projects or purposes such as developing new products or services. 

They do come with a number of benefits although there are disadvantages associated with using too, such as:

• You won’t have to repay the grant

• The UK government won’t have any control over your business

• The grant will not require you to part with any part of your business

• There are many different grants available

• Competition for the grants is extremely fierce

• It is expected that the business would need to meet the value of the grant with its own funds

• Usually, grants are only given for proposed projects and not those that have already begun

• The application can prove time-consuming

Government Guaranteed Lending Scheme

This is a scheme that works with UK Banks and so, 75% of the loan is guaranteed which means that you won’t need a large amount of security in order to obtain the loan. There are benefits that come with the scheme including:

• You can borrow anything from £1,000 to £1,000,000

• You can choose from variable or fixed interest rates

• Borrow over a period of three months to ten years

• Take capital payment holidays

• Take a loan or overdraft - whatever suits your needs.

Commercial Finance

Commercial finance is used to purchase a business. It will give you the scope to have the repayments spread over a longer term although this kind of finance will require some form of security.

Business Partners

This is similar to working with friends and family which means that there is a risk of conflict. However, each partner should have a role to play and should implement their strengths to help make the business a success.

Give Yourself The Chance To Obtain Financing

It is not just a case of asking for financing and investment because you have to prove that you have a viable business that can grow their investment. As a result, you need to make sure that you have a business plan that is informative, professionally written and concise because this will ensure that they can see what your business is all about. This is where it can make sense to invest in a professional business plan writing service as this will give you the best possible chance of succeeding.