The vast majority of business in the UK are funded by entrepreneurs themselves or family and friends. It’s not unusual to hear of small business owners who have mortgaged their own house to turn their dream into reality. But this approach can hamper growth. The government’s Patient Capital Review found that even some of the UK’s highest potential, most innovative start-ups can struggle to scale-up because of a lack of long-term finance.
From government-backed programmes to private investment networks, there are lots of initiatives aimed at helping new businesses find the capital they need to get off the ground. Government grants depend on the size, industry and age of a business. For businesses based in England that have a plan to create or safeguard jobs and are looking for less than £1million, finance could be secured through the government’s Regional Growth Fund (RGF) scheme. Through the Government-backed Start Up Loans scheme, businesses could secure a loan of between £500 and £25,000. The Start Up Loans scheme works with organisations such as The Prince’s Trust which grants in special circumstances to 18-30-year-olds starting a business. The Prince’s Trust also provides access to training courses, mentors, coaches and expert advice as part of the package to take the business from idea to launch.
For businesses that export goods or services, government support may be available through UK Export Finance (UKEF). The UKEF underwrites loans from banks to businesses exporting goods, making it less risky for the bank, therefore encouraging them to lend.
Small businesses may seek funding from venture capitalists (VCs) who invest their money in innovative businesses at an early stage in return for a share of equity. The British Private Equity & Venture Capital Association provides information to help businesses gain access to this kind of investment. Crowdfunding follows in the footsteps of equity finance by allowing many people to invest smaller-sized amounts in return for equity or other non-financial rewards and it is worth looking into these alternative routes.
A solid business plan is key to sizing up how much money a business will need to trade and develop in the first few years. Thinking about expenses and how to control costs from the beginning will reduce the amount needed. A mobile-only business account with Starling Bank, which has no monthly fees, can help small businesses and sole traders keep on top of the figures with real-time notifications every time money leaves or enters the account, the ability to categorise different transactions and the option to export figures to share with an accountant.
Find out more about Starling Bank at www.starlingbank.com.