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Raising finance for your business: Where to start?

To help you kick-start your business, there are several ways in which you could raise finance to get your idea underway or to further accelerate your growth. At the time of writing, these are the most common routes for you to explore to raise finance. However, new offerings for finance are constantly evolving in line with financial innovations – so we recommend you keep a close eye on what’s happening. For now, these are the recommended routes, meaning you don’t have to rely exclusively on traditional avenues, such as banks, to raise funds.

Keep it in the family

When transforming a new idea into a business, you could first go to your friends and family to help raise funds. Whilst many start-ups do this to help fund their new venture, it is advisable you seek legal advice to ensure you capture all aspects of your agreement, in writing. This could be a simple contract between parties, including a detailed business plan and financial forecast for their review. This will help prevent challenges that may appear in future, protecting your business and the investments of your friends and family. Most importantly, it will help you maintain your personal relationships.

Business Angel investment

Angel Investments is a means, for private and industry investors, to explore opportunities to use their personal finance, in exchange for shares in your business. Their expectation is usually for a return on their investment, between three and eight years. The good news here, is that Angel Investors typically play an active role in your business, offering support and guidance to your strategy and plan. Obviously, an investor familiar with your industry would, in most cases, be the best choice. For more information, the UK Business Angels Association is a good place to start.

Crowdfunding

One option, rather than asking a few people to contribute large sums, is to ask a large amount of people to each invest smaller amounts. This is known as Crowdfunding, which can take several forms: 

  • Equity (when the investment is exchanged for shares or for a stake in your business)
  • Debt (when the money is provided with the view to receive money back with interest)
  • Donations (when people believe in your idea and base their contribution on their belief in that cause). Donors will expect nothing in return for their provision of funds.

Grant and Loans for Start-Ups

The government aims to accelerate the UK economy, and as such, provides grants and loans for businesses. Grants are where a portion of taxpayers’ money is saved each year, to drive new business ideas. With the money offered nationally, you will need to apply, so the government can assess whether you are eligible for a grant. Start Up loans are provided through a government scheme aimed at entrepreneurs, with the average loan estimated at £6,000. Some loans can be increased up to the value of £25,000, however, they need to be supported by twelve months of business mentoring. You must repay any loans back within five years, typically with an interest rate of 6%.

Lotuswise Chartered Accountants and Business Consultants can support your business and help you succeed. To find out how, please contact us. To also get even more useful business and finance information and tax advice tips, check out our app on Google or Apple stores.

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