Statistics from Micro Biz Mag indicate that about 1,843.5 startups were founded in the UK in the 2018/19 tax year alone. Starting your own company is undoubtedly an excellent idea if you develop a fantastic business idea and put the necessary groundwork in place. However, you will likely hit a roadblock with funding since starting a business is no cheap undertaking. Luckily, there are numerous financial options your startup can turn to for money to fund its growth. Here are some of the best sources of funding to consider for your startup.

  • Startup business loans

Startup business loans are worth considering if you are a new business owner or have been trading for less than two years since they are an excellent funding source. A startup business loan is an amount of money you borrow from an organization to fuel your company’s growth. These loans are typically unsecured, so you do not need to offer valuable business assets as security. Startup business loans from private lenders provide up to £500,000 in funding, allowing you to repay over one to three years. Alternatively, government-backed startup business loans offer up to £25,000, allowing you to repay over one to five years.

  • New partners

You can also access funds to fuel your startup’s growth by taking on a new business partner, depending on your company’s structure. For instance, if you are a Limited Liability Company (LLC) or Limited Liability Partnership (LLP), you can invite new partners into your team to fund your company. With other members in your LLP, you can also widen its social network of business contacts and potential investors. Besides giving more cash to fund your LLP, new members can also bring a wealth of professional experience to the table to drive the business forward. Other benefits of an LLP include more straightforward compliance requirements than a Private Limited Company. Also, it is a separate legal entity and has perpetual succession. If all these benefits appeal to you, it may be in your best interest to change your current company structure to an LLP if possible. Thankfully, a guide to limited liability partnerships exists to provide you with all the details you need to consider before making this decision.

  • Crowdfunding

Crowdfunding is a popular way to raise cash for your modern startup for various good reasons. This method allows you to access funds from little contributions from various purchases and individual investors. You can run an equity-based crowdfunding campaign where you give a stake in your company to investors based on the size of their investments. On the other hand, you can run a reward-based crowdfunding campaign that offers perks like free products and services to your investors in exchange for their capital. Reward-based campaigns are pretty common, with Nerdwallet estimating that there are about 19 times as many reward-based crowdfunding campaigns as there are for equity-based crowdfunding. CrowdCube, Seedsrs, Kickstarter, and IndieGoGo are some platforms you can use to obtain crowdfunding for your startup. However,  significant preparation and marketing are necessary to run a successful crowdfunding campaign, so keep this in mind for the best results.

  • Invoice Factoring And Financing

Invoice factoring and invoice financing are two excellent and fast ways to access funds for your business. Invoice factoring involves selling your company’s unpaid invoices (receivables) to a financial company. This company will offer you a good chunk of the cash owed on the invoice, known as a cash advance, within two days. Then, the financial company chases down payments from your clients and pays you the remaining money (reserve) after deducting their service fees. On the other hand, invoice financing allows you to borrow against your unpaid invoices instead of selling them. While awaiting the payment of an invoice, you can borrow a considerable sum of its value from a financial company and obtain this money as a cash advance. Then, you will pay back the cash lent to you by your financial company after your client pays you. Flexibility, fees, and how you prefer to receive customers’ payments should largely influence your choice between factoring or financing your invoice.

  • Angel investors

Angel investors are high net-worth people who offer promising startups funding for a portion of equity or royalties. These investors are lifesavers for many startups in the initial stages who lack many investors to back them. Many angel investors also act as mentors due to their extensive business experience, and you can also leverage their connections within a particular industry to propel your company’s growth. To find your angel investor, you can ask fellow entrepreneurs to connect you to reputable angel funders they know. In addition, research angel syndicates often run pitching events that you can apply to partake in. 

Furthermore, you can reach out to these investors on LinkedIn and engage with them. You can also attend networking events where you are likely to meet such people, so you give a compelling elevator pitch and exchange business cards. However, remember that it is vital to do your homework well when seeking the right angel investor. Many angel funders prefer investing in industries where they have the most experience, so consider researching their websites, social media profiles, and investment portfolios to see if they would be interested in your business in the first place before approaching them.

  • Venture capitalists

Venture capitalists pump huge sums into startups or expanding companies with outstanding potential. They typically invest more money than your average angel investor. As such, it is no surprise that these investors are responsible for supporting some of the world’s most innovative companies like Airbnb and Facebook. Venture capitalists are worth considering for their vast sums of capital, extensive business knowledge, and willingness to take on high risks that other investors shy away from. However, they take on these high risks with the hope of gaining higher rewards, so your business plan has to be solid to convince a venture capitalist to part with their money. Also, it is essential to note that less control over your business may accompany accepting venture capital since these investors are more hands-on due to the enormous sums they offer.

  • Business credit cards

Business credit cards are also an excellent source of funding for your enterprise, so keep this in mind. According to Finder, there are about 500,000 active business credit cards in the UK. Business credit card limits can reach £10,000, and so you can rely on them as a stress-free cash source as long as you pay off your debt within the interest-free period. Nevertheless, numerous financial experts advise against using business credit cards to start your business. These cards have high-interest rates with strict repayment periods, so it is easy to fall into crippling debt if you don’t pay on time. This debt can also have a damaging and lasting effect on your company’s credit rating, affecting your chances of obtaining finances in the future. Still, these cards remain a practical option you can rely on for short-term use to improve your instant purchasing power.

  • Business overdrafts

Business overdrafts are a quick way to access funding for your business that you should consider for various reasons. A business overdraft offers you more short-term cash flow than your business has in capital. However, business overdrafts typically come with higher interest rates than traditional loans, and many lending banks even charge overdraft fees on top of the interest. Also, you can pay this loan as and when your cash flow improves, although your bank can insist on repayment at any time. As such, business overdrafts carry significant risk, so it is best to think about whether this funding source is best for you before choosing it.

Author

Sumit is a Tech and Gadget freak and loves writing about Android and iOS, his favourite past time is playing video games.

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