When you’re thinking about starting up your own business, one of the most daunting aspects can be acquiring funding for it.
Within the UK alone, around 20 percent of businesses will fail within their first year, while 60 percent of businesses will fail during their first three years of operation. We don’t mean this to be discouraging; if you have a solid idea, there’s no reason your business can’t succeed. However, acquiring funding can be hard. Here are 10 top tips to help you secure startup funding.
#1 Use your own money
If you’ve got a significant amount of money stored away, now would be the time to think about using it. Your savings are awaiting a rainy day, true, but they’re also there to help you realise your dreams, and what better way to do that than to get your business off the ground? If you’re hurting for big cash reserves and you believe in your dream, you could even consider getting an unsecured personal loan that you can pay back as your business escalates in scope. Just make sure you find a reputable provider!
#2 Create a business plan
When you’re looking for investors to help you with your startup, you’ll notice that most of them respond more positively to a business plan than to simple dreaming. If they can see that you’ve got every aspect of your business’ future mapped out – to the extent that you possibly can, of course – they’re much more likely to part with their money. A business without a plan is an uncertain proposition, and there’s nothing investors hate more than an uncertain proposition.
#3 Don’t be afraid to ask friends and family
Your friends and family may be willing to help you with funding for your business. You’ll never know unless you ask, so if you’re on good terms, put out feelers and see if they’re interested. If it’s a business idea that particularly interests them, you could even make them partners and cut them in on the profits! Friends and family members who have businesses of their own are particularly good sources of funding because they’ll also understand the business landscape.
#4 Think about crowdfunding
If your business occupies an underserved niche or you’ve got a killer idea to corner a market, then crowdfunding could be a good way to get cash for your startup. Successfully crowdfunding a business means you have a guaranteed group of people who are interested in the business and want to see it succeed, which is more than many can say for their startup. Just know that crowdfunding audiences can be more discerning than some startup investors in some cases.
#5 Try angel investors
Although the name might be slightly misleading, there’s no doubt that angel investors have helped businesses all around the world. In essence, angel investors are individuals with a lot of capital who provide some of that capital to help a business get off the ground. In return, however, angel investors often want a significant portion of that business’ proceeds, so they’re not an appropriate option for you if you’re not absolutely convinced your business is going to turn a profit quickly.
#6 Apply for a business loan
It’s a fairly straightforward and boring option, but one way to get funding for your business could simply be to apply for a business loan. Many banks and other lenders will provide loans with specific terms and conditions tailored for businesses. Be aware, though, that you’re going to need to pay that loan back, and while some lenders may have periods of deferment, eventually that loan won’t just be money to help you start your business; it’ll be another financial concern.
#7 Have a solid idea
This tip doesn’t pertain to actual funding methods so much as something that will help you secure funding with skeptical investors. If your business has a solid idea – one that isn’t necessarily an existing concept, but that has a grounding in an industry known for being profitable – then that will help investors to make their decision. Creating a business that’s a high-risk proposition with no guarantee of return is going to turn investors off massively.
#8 Try venture capital
Venture capital is only a viable option for certain kinds of businesses, but if you’ve got a tech startup or you’re in sciences, venture capital could be the right choice for you. In essence, venture capitalists provide large sums of money to businesses in exchange for equity stakes, and they typically go for businesses with high growth potential and proven plans. Many venture capitalists won’t invest until the later stages of a business’ operation, however, so don’t be deterred if you get rebuffed.
#9 Stay optimistic
Again, this isn’t a funding source, but it is a very important rule. When you’re getting rejected for funding applications – and you almost certainly will be – it’s crucial not to let yourself get disheartened. There could be many reasons why your funding is being rejected, so take a step back, look at your plan again, and see if there aren’t any aspects you could refine or different approaches you could take. If you really believe in your business, giving up won’t be an option.
#10 Do your research
Perhaps most importantly, you should be researching your potential competitors at all times. If you go into funding meetings armed with knowledge regarding how your competitors were funded or what their situation was when they started, you’ll be in a much stronger position to negotiate your own funding. It all comes down to being confident, assured, and knowledgeable. Those three traits are extremely attractive to investors, so practice them before you start in earnest.