How to start your own business: Get funding
Get funding
When you start a business, there’ll
usually be period when you’re investing lots of time, effort and money before
you start making a profit. It’s important to research your market to make sure
your customers will really pay for your product or service before you do this.
Once you’re confident that they will,
you should explore different sources of funding to help with
the costs of starting up your business.
Government schemes
If you need some initial funding to
test and develop your business idea, you might be able to get help from a
government-backed support scheme.
Get a bank loan
Once you can show that there’s a
market for your idea, one option for funding your start-up costs is getting
a bank
loan.
You’ll need to be able to:
·
give the bank realistic cash flow forecasts
·
Prove that you’ll be able to pay back the loan with
interest.
·
The bank might require you to provide security
against your loan, like your house or car, in case you don’t repay. You should
think carefully about how much risk you’re willing to take on before you get a
loan or give any personal guarantees.
Selling shares
If you need more investment, you
might be able to raise money to fund your growth plan by selling shares in your
business. You can do this by getting friends and family to invest. However, if
this isn’t enough you can look for sources of ‘equity funding’, including:
· ‘venture capital’ from companies who invest large sums of money in businesses that they think will grow quickly (known as ‘private equity’ companies)
· ‘crowdfunding’ (where a large group of people invest money in a business idea, usually via the internet)
alternative sources of funding like
‘peer-to-peer lending’
Any outside investors will own the
company jointly with you and the other founders. They have a say in the running
of the company, and are entitled to get a share of the profits, known as
‘dividends’.
You should get
legal advice before selling shares in your business.
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