Small Business Funding Options
What Are The Small Business Funding Options Available To You?
Money can be a major headache for many people wanting to start a small business as they cannot find the ‘petty cash’ to get it off the ground.
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Table of Contents:
Self-Financing
Borrow From Family & Friends
Small Business Bank Loans
Personal Borrowing
Grants & Government Help
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So you need start-up costs to get your business idea off the ground. But you also need to have additional liquid funds (£10K is the norm) behind you to help keep your business running until the profits start rolling in.
Below, I have outlined the main small business funding options:
Self-Financing
This is the option that most of us would like to be in - you have a wad of cash waiting to be used in your savings account.
However, you might have some money in the bank where you can part-finance your business and borrow the remainder.
The options you might want to consider are:
- Getting a mortgage or second mortgage
- Borrowing on a credit card or getting an unsecured loan
- Selling any assets or possessions
Borrow from Family & Friends
If you know someone that is close to you and they have money in the bank, then you might want to think about asking them for a loan. This would be great in the fact that you probably won’t have to pay any interest as you would if you got a bank loan. However, be aware that this might not be the perfect scenario as there will be implications:
- You might feel under pressure/embarressed to pay them back.
- They are bound to worry in case your business doesn’t take off and they won’t get their money back.
- What will happen if your business actually does struggle and fail?
It would still be a good idea to get a Solicitor involved and get a contract drawn up for peace of mind for both parties involved.
Small Business Bank Loans
This tends to be the most popular of choices for small business funding. Be aware that you will have to present a business plan to the bank representative interviewing you.
This is necessary to show that you are serious about your new business venture and that you have a viable plan for it to succeed (and be able to pay them back).
Start by going down the High Street to your local banks and building societies collecting information booklets. Then definately go Online to do extra research to find the best deal for you.
If you need to borrow a large amount of money then you will need to offer security, i.e. your home. Take extra care when making this decision!
Personal Borrowing
You could think about borrowing money via a personal loan. However, you normally have to say what you need the money for i.e. home improvements, a new car etc. Generally the bank won’t lend money for a business venture on a personal loan.
Grants & Government Help
This is another popular form of financing a small business venture. Contact your local government and ask what grants they offer to small business owners. Also go and seek out your local Business Link (or something similar in your country). They are a great first port of call when starting a new business so it would be wise to get in touch with them anyway as they can help with all aspects of running a business.
So as you can see there are a few options for small business funding to help get your business off the ground. Unfortunately at the time of writing this there is a recession going on and the banks aren’t really lending any money out. But you never know, I would still give it a try!
