Do you need to fund your startup and get some money together to take those initial large steps? These tips are here to help you do so.
A bank overdraft can provide a quick, flexible cashflow for companies that have a fluctuating income. It is quite a simple idea: in the leaner months, you dip into the overdraft and come back out once business has picked up.
The vast majority of banks typically charge interest on the overdrawn amount only and most offer customized packages for young businesses. For instance, NatWest has a Business Overdraft for current customers for up to 12 months, with the interest being payable only on the amount borrowed with no set minimum amount that has to be repaid every month.
The interest rates on bank overdrafts, however, are typically charged above the base rates and the overdraft amount is usually repayable on demand in most cases.
A bank loan or even a fast high interest loan can help you start a business and will give you the vital finance to get things underway. Look for a loan that’s flexible and fits with your business requirements – a lot of people find https://www.loanski.co.uk/ to be a good option.
The different types of grants available to small businesses are literally in the thousands. The hard part, however, is to find them, and get through the application process, which can be arduous and long. If you or your business qualify, they can provide the financial impetus needed for your idea to either get started or grow into something greater and possibly better. It’s a great way to fund your startup if you can be patient and file all of the needed paperwork.
Numerous Community Development Finance Institutions (CDFIs) have been established around the country for helping individuals as well as businesses that have a difficult time accessing, or have been previously denied credit from lending organizations and banks.
CDFIs help with everything from working capital and bridging loans to funds for equipment and property purchases. However, their terms tend to be restrictive: you have to be either a social enterprise or micro-business and be based in a disadvantaged area for you to qualify.
Crowdfunding essentially refers to an extension of the charity sponsorship page in the world of business. People get together, on crowdfunding platforms, and pool money towards a certain idea or venture – it could be 10 people putting in $1,000 each, or 5,000 people each giving $2.
Investors or donors on the crowdfunding platforms such as Crowdcube or Kickstarter, are usually private individuals providing miniscule sums, which means that they are not likely to give you the kind of rigorous conditions and grilling angel investors would.
You can also try scoping out your idea’s popularity through a crowdfunding platform and get some critical word-of-mouth marketing going.
Business Cash Advance
Companies such as Liberis and Wordplay, for instance, allow businesses to receive money upfront before the invoices and debts have actually been paid.
Under the agreement’s terms, if you will be using a card payment machine, the financier will purchase a fixed percentage of your future debit/credit card transactions at a discount and subsequently advances the cash into your bank account. The repayments can be rescheduled at a pre-agreed percentage of each transaction, which is usually between 10 and 20 percent.
A cash advance allows you to secure as much as $300,000+ without being burdened by collateral or even fixed monthly repayments, and only paying back the advance once your customers have paid you.
However, you must first meet a rigorous set of conditions for you to qualify for a business cash advance. For instance, Liberis insists that all clients must have traded for at least 4 months, with a minimum average per month of $2,500+ in card takings as well as the ability to process debit and credit card transactions.
Asset-based loans work the same way as mortgages. Money is borrowed against an existing possession, and, if you are unable to meet obligations, the asset is repossessed. Assets that you can use as collateral include premises and property, equipment, inventory, and accounts receivable.
The interest rates charged might be punitive, but asset-based financing can be quite useful for companies that are desperate for cash or businesses backed by valuable property that is yet to earn major profits – such as a plant hire specialist or a hotel.
Peer-to-peer exchanges, such as Funding Circle or Zopa, will connect you to private lenders and may be an option to fund your startup. The goal is to build a personal relationship between yourself and the lender, thus fostering patience and trust.
A number of companies are currently well-established in this space, and some have generous terms. Zopa actually offers personalized rates that won’t affect your credit score and usually does not charge early repayment fees.
Starting your own consultancy from home? Have an idea for a website that you can code and build yourself? Over the years, there have been numerous successful ventures that started out with no or minimal amounts of cash. The best way fund your startup is to not need any funds in the first place.
This funding method usually works best if you are offering a service or product where payments are received before you actually deliver the goods or have to buy any stock. The revenue that you receive can then be used for ploughing back into growing the business.
It is definitely the most risk averse way to get started with your business, and while it is probably not the fastest route to a multi-million-dollar turnover nothing is stopping you from eventually getting there.