How to get money to start a small business

Published on 14th August 2018 - Last update on 12th September 2018

Do you have a money-making idea that you want to turn into a reality? Whether it’s an original concept, exploring another avenue or improving upon an existing business model, deciding to become your own boss can be very exciting. But, at the same time, it also comes with its own unique set of challenges as well. One problem that many new businesses run into is a lack of capital, which is vital for supporting growth, innovation and day-to-day operations. However, there are plenty of funding opportunities available to you, you just need to know where to look. So if you have an idea for a business in your local area, just some of the funding opportunities you have available include:

  • Grant schemes
  • Investment crowdfunding
  • Peer-to-peer lending
  • Secured business loans

Grant Schemes

Grants are a popular choice of funding for many new business owners since you’re not required to repay any of the capital you receive. However, such schemes are highly sought-after, meaning you’ll have a lot of competition. But in order to improve your chances of success and avoid wasting precious time, you need to compile a list of the grant schemes that are currently available in your local area or sector. You should also carefully review each of these schemes since they’ll all have their own unique set of requirements that will determine whether they’re suitable for your business. Just some of the questions you need to consider are:

  • What can it be used for?
  • How much could I receive?
  • What sectors are eligible?
  • Where does my business need to be located?
  • How long will I need to have been trading for?

Have a great idea for a new business in your local area? Lack the necessary funds to support your vision? Apply for a New Business Loan or learn more about how your business could benefit.

Investment Crowdfunding

Meanwhile, another useful way of raising funds for a new business is Investment Crowdfunding. This involves you using an online platform to communicate the merits of your idea, goods and/or services, past experiences and team members. Ultimately, you’re aiming to convince investors that you’re able to turn your ideas into a thriving business. Therefore, because funding is based on the amount of interest you can earn from investors, there’s no limit to how much could receive. However, in exchange for their investment, you’ll need to give away equity (shares) in your business. Just remember not to give too much of your business away as it could lead to you losing control over the direction of where your business is heading.

Peer-to-Peer Lending

Yet another way of generating funds through investors is Peer-to-Peer Lending (P2P), which is also referred to as Loan-Based Crowdfunding. Like Investment Crowdfunding, this also works by you having to convince lenders that providing funds to your business would be a wise investment. However, investors will join a panel rather than taking equity, allowing them to combine their funds and provide a lump sum. A short-term form of lending, anything that you do receive will need to be repaid using a Monthly Repayment Scheme over an agreed term lasting up to 3 years, plus interest. But it’s also worth noting that some P2P lenders may offer agreements that could last for 5 years.

Secured Business Loans

If you own unencumbered assets such as equipment, machinery, vehicles or property (such as your own home), you could use them to provide security for a Secured Business Loan, allowing you to borrow anything from £5,000 - £1,000,000 for a wide range of purposes. Offering both short (up to 3 years) and long-term (3-5 years, or more) agreement, anything that you do receive will need to be gradually repaid using a Fixed Monthly Repayment scheme, plus interest. However, before placing an application, you need to be aware that because the agreement is secured, your assets are at risk of repossession should your business default.

Need help raising funds for your new business?

Whether you’re starting up or already running a developing SME, making sure that you have the necessary funds to achieve your goals and push forward is an essential responsibility. But with a limited trading history and an unproven business model, exploring traditional forms of funding may not yield the results you need. Instead, it’s time to think outside the box and take a look at what the Alternative Finance Industry has to offer. Giving you access to a wide range of finance solutions which are suitable for any number of financial situations, all you need to do is source an agreement that is most appropriate for your business venture.  

At Rangewell, we’re an Access to Finance specialist who’s mapped over 400 lenders to offer you an overview of more than 23,000 business finance products. Our services are free to use and we’ll also guide you through the application process. So if you’ve got an idea for a new business but aren’t sure of what funding opportunities are available, apply for a New Business Loan today or find out more with Rangewell.

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David Harrison

David Harrison

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