We asked Touch Financial Consultant Michael Jones for advice on how to successfully fund a start-up company.
1. What are the challenges involved in funding a start-up?
Funding a start-up is undoubtedly trickier than funding a business which has some trading history. This is usually due to the requirements of major bank lenders being out of reach for many entrepreneurs new to the business scene.
If any start-up goes to the bank for a loan or overdraft, they will likely be turned away due to having no credit history and no collateral to secure the funding. These are often two requirements for a business loan which start-ups simply can’t meet because they haven’t had the chance to prove they are credit worthy.
2. What should an entrepreneur looking to fund their start-up business do?
Before potential business owners start a business, they should really have a solid business plan. With no or a poor business plan, funding is much more difficult to secure no matter where you go for the cash as a good business plan shows that you have put serious thought into the business.
Next, the entrepreneur will want to sit down and consider all of their finance solutions available. Start-ups often get excited about their business and run straight to the bank, only to be rejected outright for a loan or overdraft with no advice on where to go next. This is fairly common, particularly over the last couple of years and start-up owners should not be discouraged. Start-ups need to consider what traditional and alternative business finance solutions are best for their short and medium term success.
3. If you could list the top start-up finance products, what would they be?
As with most answers in the business world – it depends. If the start-up is trading with other businesses, maybe invoice finance could help. If the start-up has been trading a year already, they open up the options on unsecured loans and business cash advance. If there are relevant Government schemes, it is usually a good idea to check those out too. Otherwise there is Crowdfunding, Angel investors and even family and friends may be able to help.
4. All of these solutions could be quite confusing to a first time entrepreneur. Where can a start-up go to discuss these business finance solutions with an advisor?
The Young Entrepreneurs scheme is a good place to start if the start-up qualifies for the services it offers. With the funding available from this method being up to £10,000, this can make all the difference for a start-up. A business mentor will also be there to assist the start-up throughout major strategic decisions for the business, like developing the business plan, for up to three years.
It may also be possible to secure alternative finance such as asset based lending for a start-up, depending on their situation and needs, and should definitely be considered as an option. As far as business advisors go, start-ups can give me a call for a chat about business finance solutions, or alternatively finding a suitable accountant experienced in the related industry of the start-up will be able to offer similar advice.
Michael Jones is a senior business finance consultant at Touch Financial. If you wish to speak with Michael for more information on start-up funding or any form of business finance, you can get hold of him on 0845 388 9725 or connect in with him on LinkedIn.
Touch Financial are the UK’s largest business finance intermediary, providing FREE advice for financing UK businesses whilst selecting the most appropriate lenders for each business situation. Request a call back today using the quote form button below, or call 0845 388 9725 to speak to a consultants such as Michael about funding your business.