Start Up Loans
Whether you need start up loans to buy a business or franchise, we are here to support you throughout the process.
How To Finance Your Business
Business Lending
Your company could borrow between £1,000 and £3 million with a business loan, depending on your circumstances. You can pay back the start up loans back over 1 month to 15 years. There are several types of start up loans, some work in the same way as a personal loan, while others allow you to sell your unpaid invoices or a fraction of your debit card sales to raise funds. They can also be used by both established businesses looking to expand with start-up loans who need funds to get their business up and running.
Raise Money From Family and Friends
Family and friends is the most common way to finance for start-up loans. However, when you turn loved ones into creditors, you are risking their financial future and personal relationships. A classic mistake is approaching friends and family before a formal business plan is even in place. To avoid it, you should supply formal financial projections, as well as an evidence-based assessment of when your loved ones will see their money again. This should reduce the likelihood of unpleasant surprises. It also lets your investors know you take their money seriously. You also need to seriously consider how the arrangement will be structured. Are you offering equity? Or will this be a loan? Perhaps most importantly, you need to emphasize the risk involved.
Business Credit Cards
With a business credit card you can make purchases for your business the same way you would with a personal credit card. They can be ideal if you need to borrow money to pay for day to day transactions and expenses. Some business cards offer 0% on purchases for several months while others offer incentives like air miles, cashback and rewards. However, some business credit cards tend to only be available to businesses that are already trading, so they cannot be used to fund the set up costs of a business.
Business Overdrafts
A business overdraft works in the same way as a personal overdraft and is a good option for businesses who need flexible borrowing. You are normally charged interest on the amount you have borrowed, often calculated daily, and have to pay an arrangement fee as well. Some business accounts offer interest free overdrafts for a certain amount of time after you open them, but this tends not to last longer than 12 months. The size of your overdraft depends on your business finances and your business’ credit record and they are normally only offered to well establish businesses.
Crowdfunding
Crowdfunding works by pitching your business idea online and offering perks or rewards to investors if your investment target is met. It is also called donation or reward crowdfunding. It can be a great way to raise money for a new business venture but you will need a sellable idea and attractive rewards to secure the money you need. Crowdfunding can also be used by both new companies wanting to raise money to support a new business idea, and existing businesses.
Other types of crowdfunding include:
- Debt crowdfunding where you borrow money from investors and pay it back with interest.
- Equity crowdfunding where you sell equity in your business in exchange for investment.
Bank Loan
Lending standards have gotten much stricter, but banks such as J.P. Morgan Chase and Bank of America have assigned additional funds for small business lending. So why not apply?
Government Grants
Government grants are designed to support new businesses, those in certain sectors of the economy, or specific areas of the UK. They are good if you need an injection of cash to get started. The big advantage of grants is that you do not have to pay the money back and you keep full ownership of your business. Each grant has different criteria for the businesses they are willing to fund though, so check these carefully before you apply.
Angel Investors
An angel investor is someone who gives you money to invest in your business in exchange for some equity in your company. They invest in both new and established businesses. Angel investors normally stay out of the day to day running of your business, but they may set some restrictions on what their money can be used for.
For example, an angel investor may give money to purchase new machinery but not for the day to day running costs of the business.
How much money you could get for your business will depend on the angel investor, how much equity you are willing to sacrifice and the value of your business depends on the both of you.
