6 Sources Of Financing You Will Need For Your New Business

By: Sunder Singh
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It is not easy to start a business because of the costs involved. You need money to register a company name, rapidformations.co.uk can help you with that, purchase the necessary equipment, purchase or build premises and market your business. However, there are different sources of finances to help you finance your business. This article discusses some of the major sources of finances for start-ups.

1. Personal Savings

You can use your savings to finance your start-up and buy the equipment needed to start the business. Your savings may also provide you with the financial support needed to run the business and become your own boss.

Although you can always use your savings to fund your start-up and support your business activities, you should know the risks associated with savings. You might experience financial problems if the unexpected happens.

2. Money from Investors/Investment

Investment is another useful source of money for a start-up. You can raise money by allowing investors to fund your business and sharing your returns with them depending on how much they have invested (return on investment).

image source: wns.com

Money from investments will help you to:

  • Establish your business.
  • Promote business growth.

You should always calculate the amount of money needed to fund your business, promote business growth, and achieve your business objectives. Once you have determined the necessary amount, the next step is to find a way to raise that amount.

There are different sources of investment including family members, friends, bankers and fund managers. Fund managers want to make sure that their clients make profits in the future.

Some disadvantages of using money from investment include the following:

  • Sometimes it is difficult to capture the attention of investors.
  • Your industry sector might have limited opportunities for investors.
  • Investment might not be a common source of finances in your sector.

Nevertheless, you can still use other sources of finances.

3. Borrowed Money

Many banks are willing to lend you some money to fund your start-up. Therefore, you can use a business loan to establish your business. The loan is usually repaid when you make transactions or the bank might decide to debit a certain amount from your account on a monthly basis.

Borrowed Money

image source: pixabay.com

4. Government Loans and Grants

Start-ups and small business can also benefit from the different financial options provided by the government.

  • Loans – The government offers loans (£500-£25,000) to help people start new businesses, purchase the necessary equipment and run business operations.
  • Grants – You might also decide to use government grants to finance your start-up. The good news is that you are not required to pay back. However, you have to send an application meaning that you might not receive the grant.

There are different types of government grants. Some grants help businesses to work with people who are learning to do business. Other grants promote business growth while others are used to repair buildings.

Click here to learn more about the different types of grants offered by the government. Remember that several factors such as the sector, location, and size of your business can limit many grants.

5. Crowdfunding

Crowdfunding is a viable option if the primary goal of your business is to introduce a product that does not exist in the market. People (backers) can donate money on Kickstarter.com or Gofundme.com to support a project and get rewards or early access in return.

http://crowdsunite.com/blog/introduction-to-crowdfunding/

image source: crowdsunite.com

You should let the public know why you need the money. Perhaps you want to secure intellectual property (IP) rights or produce a product in large quantities.

Unfortunately, you will not receive anything if the amount raised through crowdfunding does not reach your target (such as a monthly target). Therefore, you should only consider this option if your product can meet the promised goals.

6. Get Help from FSB

It is not easy to start and run a successful business because you need time and money. Business Creation by FSB offers different services including financial advice to individuals who want to establish new businesses.

Businesses can access:

  • Help to form a company
  • A help/advice line
  • Help with networking
  • Payment services
  • Insurance services

Click here to learn more about the benefits of Business Creation and contact a team member.

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