Whether you’re a new business entrepreneur or a start-up company looking to expand further, there are several ways to secure business funding. UK and EU grants are the cheapest way to finance a start-up company but these paperwork-heavy processes can often be headache inducing. Few grants are awarded, and for those that are, the funding usually has go toward a specific purpose and can take more than a year to be released.
A second option for funding is loans, which are usually granted to well-established businesses that can provide security to borrow against and can prove a prior history of credit, stability and financial growth. These criteria make it hard for a start-up business to qualify, even if it’s only for a small loan. Add to that bank and credit companies’ reluctance to lend money in today’s struggling economy, and approval for high-risk loans is becoming more improbable.
A third source of business funding is equity. Business angels, or private investors, can provide start-up equity, called seed capital. For young companies, private equity investors are a great source for securing initial financing. Business angels usually provide seed capital in the range from £10,000 to £40,000, plus business angels offer their business expertise and contacts to help their investments grow.
Once the business is off the ground and proves high-earning potential, then entrepreneurs can seek venture capital, another form of equity in which a group of investors usually pool money in the £100,000-plus range for shares and a stake in the company’s operations.