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What our members have to say...
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"DONE DEAL - LOIS is the one stop EPOS solution for single store retailers through to large multiples. The LOIS EPOS System allows users to maintain live stock management on multiple sales platforms, run a website and mail-order function, transfer stock through multiple locations, share resources and generate detailed reports."
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The beginners guide to raising start-up finance
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The task of raising business finance is widely acknowledged as being one of the biggest challenges facing most start-up businesses today. Although removing the barriers to starting or growing a business was a core theme of the recent Budget, it is likely that the task of securing investment and seed and start-up funding will remain difficult.
With so much information on setting up a business available, the age old question of cash remains elusive.
Luke Lang, co-founder and marketing director of Crowdcube, looks at the traditional methods of raising finance and considers some newer internet-based routes to finance that could shake up the industry.
Banking on investment
Getting a commercial loan from a bank to finance your business is still the first source of finance for many, but can be a lot harder than getting a loan to buy a new car. Banks have stringent rules around awarding a business a loan, which seem to have become even more rigorous as a result of the credit crunch.
Banks’ tendency to only loan money to established businesses is a big challenge for most start-ups who cannot show three years trading and profit. Without a relaxation of these rules, raising finance from a bank to kick start your business will continue to be complicated, and “no” or “come back when you’re established” will continue to be the default responses.
Angels and venture capital
Business Angels and Venture Capital (VC) firms that invest in high-growth businesses in exchange for equity (a percentage of the business) aren’t always sent from heaven. They are cautious investors and require entrepreneurs to demonstrate that they will be able to deliver a significant growth in turnover within five years, or be worth selling on in six to twelve months to bigger investors.
Further, tracking down the right Business Angel or VC that is willing to invest in your business can be challenging and might take longer than you hope. Few people who submit business plans to angel investors, venture capitalists or similar sources of funding are successful in raising the money they seek. However the good news is that once you find the right Business Angel they tend to make decisions quickly, additionally you also get an entrepreneur with experience in business growth and an address book of influential contacts that may open doors that you have previously found closed.
Getting grants
With the level of Government budget cuts currently being undertaken, it’s not going to be easy to find a Government grant. The Regional Development Agencies (RDAs) and Business Link who were previously good places to start are planned to be abolished or significantly scaled back, putting many grants in jeopardy. The Government is making it easier to get grants and in certain parts of the country and for certain business types grants can be easier to find.
Throughout this turmoil however, the Princes Trust continues to be very popular offering practical and financial support for young people to start-up in business.
Crowdfund your way to success
To some extent little has changed since the 18th century where entrepreneurs with bright ideas went cap in hand to wealthy individuals. Nowadays, innovative start-up enterprises are increasingly looking to find new ways to raise capital.
The Internet enables them to bypass traditional models of business finance. With so much pent up demand for finance, it’s no surprise that a number of options are emerging. One of the most popular new options available is crowdfunding: finding investment from a ‘crowd’ of ordinary people.
Websites like Funding Circle and Crowdcube are challenging the major banks by using crowdfunding principles in the way they finance small businesses.
These new web-based models let entrepreneurs showcase their investment opportunity online using a Dragons’ Den style video or web pitch to attract investment.
This pioneering new way of raising finance challenges conventional funding models by turning ordinary people into investors who can pool small amounts of money (often as little as £10) in support of an idea, person or business.
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