There are a number of ways for entrepreneurs to secure business funding, including traditional bank finance or overdraft, business angels, venture capital and grants plus more. However, obtaining business funding from a bank or traditional sources may be difficult for a start-up business, especially in a difficult economy. Business grants can take a long time to be approved and are often limited.
It is becoming increasingly likely that entrepreneurs will turn to business angels or private investors to provide equity for a start-up, called seed capital. In addition to providing funding, business angels often provide expertise and knowledge to help a business succeed, and their investment to grow.
Once a business becomes established and can offer the potential for high returns on investment, venture capital may be considered. A group of investors will invest money which is usually in excess of £100,000 in return for shares in the company. There are significant tax reliefs to be claimed for investors in business, especially as the government are encouraging investment opportunities. To succeed when applying for this type of funding, you must have a business plan which is ambitious but realistic, a unique selling point, a high return on investment within a short period of time and a proven track record.
An alternative source of funding is Crowdfunding, which originated in the US. With crowdfunding, an entrepreneur attracts funding from a ‘crowd’ of people who all invest a small stake in a business venture. This source of funding provides a strong network of support and can be a fast method of fund raising for your business.
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