Article Contributed by Gladstone Brookes
Finding the necessary funding is perhaps the most crucial step in setting up your own business if you hope to survive the tough times gripping the economy. The good news is that there are many different ways to do this, meaning you can choose the method that you believe will best meet the needs of your fledgling organisation.
Loan
The most traditional and popular way to fund a new business is to apply for a loan from the bank. If your application is approved then they will lend you the money which you will pay back gradually over time, plus interest. The frequency of payments and rate of interest will be pre-determined before the deal is agreed and as long as you make sure not to take on more than you need to by agreeing to the likes of PPI, then loans can be a good way to support your business until it finds its feet.
Credit card
A business credit card can be very useful for making purchases when funds run dry or cash flow isn’t at its best; both situations you are likely to find yourself in during the early stages of trading. You have to make sure you keep on top of payments however, or else your credit rating will plummet and you’ll soon find yourself in debt you can no longer afford to pay off. Credit cards are very much a safety net for tough times; not an invitation to spend recklessly.
Grant
In some cases, government organisations or other businesses will offer grants to young companies to help them get up and running. Unlike a loan, this money is essentially a gift that does not need to be repaid and is most often awarded to – but not restricted to – businesses that intend to offer some sort of service or charity work.
Family and friends
Small businesses can often find all the financial support they need from their loved ones. Friends and family will generally agree to lend you money with much lower interest rates and a less strict repayment schedule, taking off a layer of pressure. It is important however to value their investment and treat it with the respect and gratitude it warrants; never take them for granted or else you could lose an investor and a loved one.
Venture capital
Venture capitalists are often wealthy business professionals or organisations that invest in business opportunities that the banks have deemed too risky. It has been suggested that those businesses who secure such funding are a lot more likely to succeed due to the reliable source of finance and business knowledge the investor brings to the table.
Crowdfunding
Very much a modern way of sourcing finance, crowdfunding can be done through the likes of the popular site, Kickstarter, where people and businesses can pledge money towards a creative idea that they believe has a future but lacks the necessary funding to make a reality. It is usually for a one-off idea and therefore is not a long term solution but doesn’t have to be repaid and can certainly help a budding entrepreneur to establish their business.
About the Author
This post was written by Gladstone Brookes. By taking up the claim of behalf of consumers, their specially trained members of staff work to get back money that has been lost through mis-sold PPI policies. £345 million has been reclaimed so far but they continue to accept requests to help people get the reimbursement they are entitled to.