Starting a business is an exciting prospect. You could be fulfilling a lifelong dream, doing things on your own terms, or generating an extra source of income on the side. Or perhaps all three? Whatever your situation, you’re likely to need some capital to get your idea off the ground.
You’re not alone either. The Telegraph reports that as many as 660,000 new companies are registered in the UK every year – yet 60% go under within three years, with a lack of funding one of the key reasons for their downfall.
As with any financial decision, it’s worth carrying out research to find the right option for you. Below are four common ways to access start-up capital.
The first person you should look to when launching a business is yourself. Have you saved funds to help you get set up? Can you raise cash against personal assets like your property or car?
While it may seem intimidating, investing your own money will demonstrate to other credit suppliers and investors that you’re serious about what you’re doing.
The term ‘love money’ describes any funding you borrow from friends, family or partners. You’ll typically borrow it upfront under the agreement that you’ll pay them back later once your business gets going.
There are downsides to this route, however. Your loved ones may not have much spare cash themselves – or at least not that they’re willing to part with – and introducing a business element can strain relationships.
High-street bank loans are one of the most common ways small businesses seek funding. Traditional options are secured and unsecured loans; secured loans are backed up by your business or personal assets, while unsecured loans are not. For this reason, unsecured loans are typically smaller and come with higher interest rates as there’s more risk involved for the lender.
Bank loans can prove difficult to get approved for however as their criteria can be difficult to meet – especially as a start-up.
Alternative lenders have boomed in recent years, providing a fast, flexible and accessible alternative to traditional banks. Online lenders such as Nucleus provide a variety of products including hassle-free cash flow finance, allowing you to tailor your agreement to suit you.
Alternative lenders are typically quick and easy to deal with – though not all can offer the same levels of funding as banks.
Which route is right for your idea?