If you’ve got a great business idea but no way to fund it, don’t despair. There are several options available to you. However, with over half of new businesses closing within their first five years of operation, it’s important that you put the proper planning in place to ensure you are on the path to success. Businesses with a proper plan in place have a higher growth rate. Potential investors will need to see a plan before they will even consider investing their cash into your venture.
Your business plan will need to describe who you are, your business model, market analysis including research on your competitors, organizational structure and lastly, but most importantly, the financials – including financial projections for the next three to five years.
Employee Ownership Trusts
More and more UK businesses are following the John Lewis model of employee ownership trusts which not only secures funding for your company but also delivers a sound business model. By taking a percentage of the stake in your company and offering it to potential employees you will create a workforce that are motivated to take the business forward. This also helps your company retain the best talent and reduce staff turnover which can be costly to any enterprise. It also means that you are not the only one who is keen to see your business become a success and so you are likely to suffer less absenteeism and sick pay.
Sounds obvious, but this is often a good place to start. Ask for an appointment with the loan officer at the bank you use for your personal banking. Take your business plan to the meeting and explain how much money you require and how you will be using it. If you are unsuccessful it is often worth trying other banks and financial institutions.
Family and Friends
Family and friends are often worth approaching for loans. Hopefully, they will believe in your potential and have trust in you. What’s more, if you secure a loan from family and friends this will often give you even more motivation to make your business a success as you won’t want to let them down.
Venture Capitalist firms will invest in startups in exchange for an equity share. As with employee ownership trusts, you will need to be prepared to part with a portion of your company, however, because venture capitalists have an interest in seeing your business succeed they will often provide you with additional resources to make that happen. Success in securing this kind of funding depends largely on the industry in which you aim to operate.
If you are concerned about giving away a share of your business but you still need to secure funds, you could try to find an angel investor as their funding can also be exchanged for convertible debt. If you secure the right investor you may also be able to tap into their management and mentorship skills.