When you’re launching a new business, you need to put some important foundations in place before your enterprise can be considered ready for business. Once the business is up and running, you’ll also need to jump the hurdles of providing excellent goods and services to your customers if the business is going to stay open. Without capital, achieving these milestones will be harder than they should be, which is why you need to secure as much capital as you can.
Even if you don’t have the money on hand, you can explore different financing options and get the capital you need to start your business. Below are highlights of some of your available options.
Get a construction loan
If you own a construction company or are looking to complete a building project, you might be eligible for a construction loan. Otherwise, you’re better off getting a start up loan or bank loan. Construction loans are short term loans, the duration of which is usually for as long as the project takes to complete. By the end of construction, the borrower may need to take out an ‘end loan’ to pay off the construction loan.
The building serves as collateral, making it easier to obtain an ‘end loan’. If your business deals in real estate, construction loans are some of the most readily available funding options in the industry. However, like other kinds of loans, there are specific requirements that you have to meet before qualifying for a construction loan:
- You must provide a large down payment, usually around 20%
- You need to prove that a qualified builder is involved with the project.
- You’ll also need to provide specific details, like a floor plan and details of the materials you intend to use
Get a start up loan
A start up business loan is a government-backed personal loan, and it’s available to individuals who are looking to start their businesses in the UK. Start up loans are also available for individuals who wish to expand or grow their current businesses. They are a great option because they don’t require any form of collateral or assets. Individuals can receive between £500 to £25,000 for their business, and a maximum amount of £100,000 for a business with multiple partners.
Start up loans have a duration of between one and five years and an interest rate of 6% per annum. Besides the much-needed funding, entrepreneurs who are granted a start up business loan will receive 12 months of free mentoring, as well as access to exclusive business offers that can help them succeed. Since start up loans don’t require any collateral, you’ll have to meet some conditions before you can receive one. They include the following:
– You’ll need to have a great credit score. This will assure the lenders that you’re a credible debtor and will pay back the loan
– You’ll need a plan that can show the viability of your business and the demand for your product or service
– You’ll also need to submit a personal survival budget that outlines your expected source(s) of income. This ensures that you’re in a good financial place and are more likely to spend the money from the loan on the business than on yourself.
Get a bank loan
Bank loans are the most readily available sources of funding for any endeavour, including new businesses. If you have collateral, you can secure a bank loan quite easily and launch your new business.
With a bank loan, you can also expand your current enterprise and even begin operations in new business segments. In some cases, getting a bank loan to fund the expansion of an existing business is much safer than getting one for a new business for several reasons. An existing business already has a means of generating income and is more likely to stay open than a start up.
As a new entrepreneur, you need to make sure that your business has a viable model before taking out a secured loan, or you could risk losing your collateral. If you decide to get one, it’s best to visit several banks and compare interest rates before making a final decision.
Seek out an angel investor
Angel investors are so-called because they rescue entrepreneurs and their businesses from the perils of a lack of funds. They are individuals who lookout for new and innovative businesses to invest in. Angel investors usually have a lot in assets and are out to increase their net worth by investing in profitable ventures. As a result, you might be able to find an angel investor willing to buy a stake in your company if you have a solid business plan.
Angel investors are not easy to come by, and are even harder to convince, especially for start up entrepreneurs—it’s difficult to prove the viability of a business that hasn’t started yet.
Find a partner
You don’t have to start and run your business on your own. Getting a partner can ensure that you share the losses and challenges you’re bound to experience on your way to making your business work. A partner can also give you a fresh perspective and a new take on some of the things you never considered. More importantly, a partner can provide the necessary funding for your new enterprise.
If your business meets a unique need, then people are going to be eager to collaborate with you to make it happen. In this scenario, finding a partner willing to put up the money and buy into your business may not be so difficult. However, you need to carefully consider who you let into your business. You need someone who will be as dedicated to the business as you are.
There are several funding options for new entrepreneurs to explore. These options are also available for individuals who have existing businesses and are looking to expand or branch out to new business segments. A secured bank loan is one of the easiest funding options available. However, it has inherent risks—you may lose your collateral if the business fails.
With a start up loan, even though you’ll still have to pay back, the interest rates are much more lenient, and you’re going to have exposure to other opportunities as well. The other options available are getting a partner, finding an angel investor, or getting an industry-specific loan, like a construction loan.