How to finance a business

First question, do you believe in your business idea and are you prepared to borrow money to fund it? If you’re not sure, take a day off and have a serious think about it.

Assuming you want to carry on, do you have equity in your house that you can re-mortgage? This will probably be the cheapest source of debt but not necessarily the least risky.
 

Crowdfunding an equity raise (for example Crowdcube, SEEDRS) will cost you in the long term but protects your personal assets (your house!) so it’s an alternative option.
 

Once you’re off the ground, you could also look at borrowing money through crowd funding loan platforms such as Funding Circle and Money & Co. There are plenty more. The interest cost is high but the loan is quick.
 

Venture capitalists and business angels used to only look at sizeable investments with businesses of substance but there are new entrants into the market and a well-run business with a good business plan may be able to attract their interest if they really want to fly.
 

The traditional banks are open for business and trying hard to shake off their poor reputation. They can be a good solution particularly if you trade overseas or have some unusual product needs. You can also try the challenger banks such as Metro Bank and Handelsbanken. Be prepared to give a personal guarantee and possibly a charge on your house.
 

So, having decided where to go, how do you prepare? The short answer is put your business plan together but what is a business plan.
 

Okay, a couple of things it is NOT.
 

• It is not just a set of financial forecasts. I’m afraid it’s words and numbers!

• It is also not a narrative full of business and technological jargon.

Have a look at Writing your Business Plan.
 

For borrowings, your plan will show how you can meet your repayments. Yes, a bank will probably want security but they don’t enter into agreements hoping to call upon it. They want to see that you can repay the loan and avoid them incurring expensive costs in administration if things go wrong.
 

For certain types of people or businesses and in certain areas, Government grants might be available so its worth doing some research.

And, for technology companies, do utilise the Governments Research & Development tax credits. They are there to fund R&D and they work!
 

Grants are usually only available to specific businesses, often in economically disadvantaged places. Sometimes match funding can be required. For further information about grants, speak to your local Enterprise Agency or use the Business finance and support finder.