Formally known as Financial Capability Week – Talk Money Week encourages us all to talk openly about MONEY.
On behalf of the Female Success Network, I would like to spend this week giving startups some of my thoughts on financial matters when it comes to developing a new business.
Disclaimer: This post is for informational purposes only. It should not be considered legal or financial advice. You should consult with a financial professional to determine what may be best for your individual needs.
Today I would like to demystify “Start-Up Finance”.
There are lots of different finance options available, let’s take a look at what they are, and the advantages and disadvantages.
This is from my own personal experience, nothing more, you also may be entitled to grants etc so explore all options.
So what is the best way to fund your new business?
Savings – Potentially you may have a stash of cash that you can plough into your business, this has the advantage of keeping 100% equity but are you potentially putting yourself as at risk if you don’t have additional funds to live off?
Friends, Family & Investors – This is normally when you will exchange a % share in your business for the capital you require. This has the obvious advantage of raising you the funds, but you may not want to give any of your business away. Personally speaking, if you have someone willing to invest who can also offer you business support and advice, I think this is a great option.
Personal Loan – This may not be available to you if you declare that it is for a start-up business, and the clue is in the name, this loan is against you personally and not your ltd company. I’m not a fan, but it is a way of accessing funds that you may need.
Bank Loans – Don’t expect this to be quick or easy, you usually need detailed business plans including financial forecasting. Banks don’t tend to have much risk appetite but do tend to have strict lending criteria.
Indiegogo or Kickstarter Campaigns – These are a great way to raise funds by offering rewards of your product or service as the incentive to back your campaign. You may, however, need to initially rely on your immediate network to start the backing and get the ball rolling. Strangers are more wary to back a campaign with no other backers.
Specialist Lenders – A specialist lender will have products designed for the marketplace with variable payment plans and terms more applicable to the likely cash flow of a new business. They already know that the business is new and there won’t be a track record so will tend to look at other criteria on which to base their decision making in the application process.
Funding for a start-up business can be so valuable and should definitely be considered as part of your business plan. My personal view would be to take a portfolio approach – Put in a little of your own cash and back yourself. Don’t be afraid of giving a little bit of your company away to give you some working capital, just ensure you remain both in charge and in profit. Lastly don’t be afraid to loan money for your business should you need a backbone for some of those early costs.