4 ways to fund your next business

Let’s face it, one of the biggest factors preventing most people from starting their own business centres around capital.

Launching and operating a business requires money as you build a website, creating marketing campaigns, hold stock, the list goes on and on. Being in business requires upfront investment before you start to recoup that outlay through sales and securing new clients.

That is why it is really important to create a business plan or at the very least, a financial plan, for 1-3 years, to understand the financial implications. There are lots of business plan templates available as well as financial spreadsheets you can use.

Trying to make your financial plan as accurate as possible will help you make an informed decision about how much investment of funds you actually need to use. Don’t forget, as well as the initial investment to start the business, you will also need working capital to sustain the business. Moreover, you also need to be aware of how much money you will need to survive and meet your living costs.

In today’s blog, we wanted to explore 4 ways to fund your next business venture which doesn’t involve you using all your own funds.

1. Personal Savings
This one is quite obvious, but all too often, budding entrepreneurs do not have the personal savings to launch a business. However, this very much depends on how much capital you need to get started. For example, opening a traditional bricks and mortar store will require a sizeable investment in comparison to starting an e-commerce store.

One of the most effective ways to build your personal savings for a future business investment is to plan in advance. If you have that entrepreneurial itch and you can’t imagine yourself working for someone else for the rest of your life, then you should start thinking about exit strategies.

Decide on a timeline for starting a new business, whether it is 3, 6 or even 12 months from now and start saving for that event. Set aside money each month with the ultimate goal of launching your business at the end of that timeframe. This will focus your mind and give you a reason to watch your spending.

2. Family and Friends
The next best option is to ask for investment from family and friends. Although it can seem daunting and uncomfortable, if you believe in your business idea and your family/friends can see your passion they may consider proving the investment.

However, while this investment may come as a loan, it is good to offer something back in return. For example, a small percentage in your business (think Dragons Den!) or a short payback period based on your first few sales.

Your goal is to make the investment from your family and friends as risk-free as possible from their side.

3. Banks
Although the lending criteria has become stricter over the last few years, many banks and lending institutions are happy to provide investment for a new business. However, they almost always require a business plan as well as security/guarantor to minimise their exposure.

The benefit of working with a bank is they will provide much more than the finance. For example, banks have a number of business start-up services such as marketing and accounting advice that will be useful in the short/medium term.

Banks such as Natwest here in the UK, also run a number of workshops designed to upskill entrepreneurs in a variety of areas.

Above all else, when taking out a loan with a bank, make sure you can realistically manage the repayments, particularly at the start when you won’t have any revenue from sales.

4. Crowdfunding
This option is relatively new and breaks away from the more traditional methods mentioned earlier in this blog. Crowdfunding is where you fund a business through a large number of people who invest a relatively small amount of money. In exchange, you can provide your investors with early access, a prototype or some other incentive for investing in your business.

There are a number of crowdfunding websites online that may be suitable for the type of business you are looking to launch. 

Summary
Don’t let the initial investment stop your next big business opportunity. There are a number of ways that you can raise finance for your business, both in the short and long term. The decline in grants over the last decade has meant that you need to be a little more creative when identifying the appropriate funding source for your next business.

If you would like to remove a lot of the guesswork associated with planning the launch of a Digital Agency, contact us today. We have compiled a 3-year financial forecast that shows you how you can break even and recover your initial investment with just 4 clients.

To access your personalised financial plan, please download our Business Starter Pack here.

Until next time, take care.