Best Option

Find the right accountancy solution for your requirements

When you’re first setting up your business, a lack of cash flow can be hard to overcome. After all, the old adage ‘you need to spend money to make money’ became common parlance for a reason.

But where does a budding entrepreneur go to get that vital startup business funding for their new venture? And how do you then convince anyone to invest in you? This guide looks at the crucial steps you need to take to attract new business funding and freelance investment.

 

Get a solid business plan and financial forecast

The hyperspeed pace of the digital age has led to a decrease in long-term, considered planning. But the humble business plan is still a vital step in building a business—and one that will help to secure funding.
When teamed up with a decent financial forecast, a well-crafted business plan is a bulletproof way to persuade investors to put money into your business. It’ll also have the added benefit of galvanising your vision for the business, as well as stress-testing its viability in the marketplace.

 

Consider using savings or support from family

Many new business owners will use personal savings or cash loans from family or friends to get things off the ground. And this method makes a lot of sense. After all, it’s easier to convince your parents or siblings to invest in your fledgling business than it is to get a bank manager to open their wallet.
A word of caution, however: borrowing money from those close to you can sometimes put a lot of strain on a relationship. Both parties need to be absolutely sure that they know what they’re getting into, as well as being clear on the details of repayment.

 

Get a business overdraft or loan from the bank

A small business overdraft or loan from your bank is a straightforward, relatively accessible way to get funding. However, as with most lending transactions, the bank will likely want some security against any money they lend you. The most common form of security is the borrower’s home, meaning that, should you default on the loan, you could lose the roof over your head. This rather scary thought reinforces the point we made earlier about making sure you have a rock-solid business plan and financial forecast in place.
A tip for seeking out funding from banks: approach the bank with whom you have your personal account before going to any competitors. They’ll have a better long-term picture of your finances and, in many cases, will be more likely to lend you money.

 

Explore government grants and funding options

There is a huge range of different business loans, schemes, and grants available through the government. The criteria for getting access to this funding can cover everything from location to business size to environmental considerations. The Prince’s Trust, for example, offers new business support for entrepreneurs aged between 18 and 30, via its Enterprise scheme.
Funding is also widely available at local level. You’ll need to do a bit of digging to find out what is available in your area, but your hard work could result in some quite significant funding. For example, the Greater Manchester Investment Fund, managed by the Greater Manchester Combined Authority, offers loans of up to £5 million to businesses that ‘demonstrate a clear link to jobs secured within Greater Manchester’.

 

Get some external equity investment

Many businesses gain funding via equity investment, whereby an investor will exchange cash for a share in your business. If you’ve ever watched an episode of Dragons’ Den then you’ll probably have a decent grasp on this type of funding.
New startups, in particular, can benefit from the funding provided by an investor (often referred to as an ‘angel investor’). They’ll often inject somewhere between £50,000 to £70,000, in exchange for around 25% ownership of your business. That business plan we talked about earlier will really help you when it comes to approaching angel investors.

And remember, although the investor is bringing the cash, it is still your business, so protect it—and your business vision—accordingly.

 

Our top five tips for cash-strapped businesses

So, we’ve looked at some of the most common forms of funding, and given you advice on the ways to approach them. But what happens if you can’t get access to that cash? Well, all is not lost. It’s still possible to make your business work, even when external funding isn’t possible. Here are our top five tips to keep things running on a shoestring:

  • Learn the art of bartering. It might feel awkward at first, but once you get into the swing of bartering, it can be a liberating process. Remember: the price of everything is negotiable.
  • Get savvy with free tech. Whether it’s using your parents’ WiFi, or a free website service (such as Wix), taking advantage of the gratis stuff will help save precious pennies.
  • Use social media to promote your business. You’ll be amazed at how widely you can promote your business just by getting friends and family to shout about it on social media.
  • Keep your full-time gig. It’s a difficult balance, but running your business alongside full-time employment will remove a lot of financial pressure.
  • Cash in on your experience. Your business is much more likely to succeed if you build upon the skills and knowledge you already have. Rather than jump into uncharted waters, take advantage of your unique skill set.

If you’re looking for more advice, guidance, and business tips, be sure to check out our list of free resources.

 

Other articles you may find interesting:

Need help finding the right accountancy solution for your requirements?

Answer the questions below for our recommendation.

1
2
3
Do you: (select the first that applies)
Please select an option