Funding your start-up business

Having sufficient capital to fund a start-up is an essential consideration, especially in the current climate.

Start-ups have been recognised as the backbone of the UK economy, and it’s easy to understand why. There were 5.98 million private businesses in the UK at the start of 2020 and 99.8% were start-up/SME sized with less than 250 employees accounted for.

Funding Routes Available for Business Start-ups

The UK Government is very keen to help start-ups and small businesses. Although they can be very difficult to get due to eligibility and competition, there are various grants handed out by the government which have helped numerous start-ups in the past. Naturally, since grants are free money, entrepreneurs will strive to attain a Government grant. They’re extremely popular amongst the business community and all submitted applications will go through a rigorous review and be awarded fairly and equally.

Business term loans are based over a pre-agreed period of time and set to various interest rates. For a secured loan, you have to have some security in place to raise the finance – such as equity in assets or money set aside. Unsecured loans are also available though, and while some lenders may ask for a personal guarantee, others won’t require any security. If the finance is urgent it may be worth looking into emergency business finance.

A director’s loan is money you take from your company’s accounts that cannot be classed as salary, dividends or legitimate expenses. To put it another way, it is money that you as director borrow from your company and will eventually have to repay.

Another kind of director’s loan is when a director lends money to the company, for example to help with start-up costs or to see it through cash flow difficulties. As a result, the director becomes one of the company’s creditors.

Crowdfunding is a great way for start-ups to get funding to get off the ground and also create awareness amongst the business community. The concept is fairly straightforward as it uses an online platform to take a large number of small investments to reach a target value. If this is met, the company receives the money and the investors will usually take a small share in the company.

The reason this is such a popular and effective method of fundraising is that there is a smaller risk for investors and it rewards unique and interesting business ideas and propositions.

Pension-led funding lets you borrow from your personal pension in order to invest into your business. This puts you firmly in control of your finances, and is a great way of starting up and growing your business whilst potentially increasing your own pension in the process. Talk to one of our Grosvenor Wealth Management Advisors to find out more about getting the most out of your pension.

Just like Dragons Den, Angel Investors are often high net-worth individuals who decide to use some of their wealth to invest in start-ups. If you’re interested in pursuing this route, you must make sure your business plan is 100% investor ready, rehearsed and revised. Don’t miss out any important details and be prepared to answer any questions the investors may have, to give you the best possible opportunity of securing investment.

Corporate investment is similar, but instead of individuals investing in businesses it refers to other businesses investing in businesses. More often than not, businesses can invest more than individuals because companies tend to have a higher net worth.

Get the right guidance to streamline your business start-up funding

Of course, this is just a selection of the different options available to you. Unless you’ve started up a business and applied for a financial support before, you’re most likely going to need the professional guidance of an experienced Financial Advisor to ensure each step on your start-up journey is taken accurately and efficiently.

If you’re interested in finding out more around best practice tips for starting up a business and managing your business & personal finances, learn more about our free webinar, ‘Ensuring business and personal finances take off together’, on Wednesday 9^th June at 10:00am. This will be the first of a three-part webinar series that we’re running alongside St Albans based accounting firm, Rayner Essex.