Financing Your Business, Officinado Business Help Directory
Financing Your Business
All businesses need capital before they can start trading, some people will savethe money they need to start their business, but most of us will have to resort
to bank loans, government grants, and credit cards.
Bank Loans
Banks generally do not lend money to people unless they have collateral or
some sort of government guarantee backs the loan. Remember that just because
the bank is prepared to lend you the money you need to start your business,
they can not lose money, they will be able to repossess your home if the business
goes under.
You may be able to protect your assets by becoming a limited company, but this
can make it difficult to get credit until you have been trading successfully
for a couple of years.
Government Loans And Grants
There are various UK government sponsored schemes that are designed to assist
new businesses. What is specifically on offer often depends on where you intend
to locate your new business, since many grants are awarded on the basis of attracting
business into certain areas. Funding is also available from organisations such
as the princes your trust and regional development agencies.
Venture Capital (Private Equity) & Business Angels (Informal Investors)
For larger businesses unable to provide the necessary security for bank finance.
If you cannot provide further capital from your own reserves, venture capital
(also known as private equity) may be the answer.
Venture capital firms provide unsecured financing in return for a proportion
of your shares. They take a higher risk than banks do in the expectation of
receiving higher returns. For your part, you have to decide whether the involvement
of a venture capital firm is worth a smaller slice of a larger pie.
Business Angels are private investors sometimes called informal investors who
invest in unquoted small and medium sized businesses. They are often businessmen
and businesswomen who have sold their business and they provide not only finance
but also experience and business skills. The motivation for investment varies
from simple financial return to community benefit.
Business Angels invest in the early stage of business development and help to
fill an equity gap.
Credit Cards
No one would ever recommend starting a business using credit cards as the principle
method of finance, but sometimes it’s the only way! If your giving up
a regular job to start on your own it is a good idea to apply for some cards
whilst you are still working because getting a credit card when your self employed
can be very difficult.
If your starting an online business having access to a credit card is essential,
you’ll need it to pay for hosting, domain name registration and pay-per-click
advertising.
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