Starting your own business on a tight budget

More and more Brits are deciding to take their careers into their own hands and become their own boss. Yet, while deciding to start your own business can be very exciting on account of the endless possibilities, it’s also one of the most challenging periods in your development.

One of the biggest hurdles you need to overcome involves the matter of cash, which you’ll need to support growth, innovation and your day-to-day operations. But if you’re determined to see your venture succeed, in spite of a tight budget, there are steps that you can take.

So after creating a business plan which should cover what you think you’ll need to function over your first few years as a start-up, and how to overcome any potential hiccups along the way, the new business loan options might seem daunting so we’ve laid out some examples:

Grants

Grants are a great way of raising funds for any number of purposes, and are often provided by local government schemes and various sector organisations. Plus, if your application for a grant is successful, you will not be required to repay any of the funds that you may have acquired. However, this also makes grants highly sought after, and you may find yourself facing down tough competition from other business owners as well. Therefore, in order to avoid wasting your time, you need to check the terms and conditions of the scheme that you’re considering. Is your business eligible? Is it suitable for your goals? How much funding can it provide? If your business is eligible, make sure that your application is submitted in the correct way. But if you are turned down, don’t be too disheartened, there are other funding opportunities available as well.

Investment Crowdfunding

Another way of raising funds for a newly established start-up is Crowdfunding. Crowdfunding allows you to pitch your business online to potential investors, which may include private individuals, local entrepreneurs or members of the general public. As such, the amount of funding that you may receive is based solely on the amount of interest and confidence your proposal generates. Therefore, you’ll need to discuss your business plans, financial situation, what makes you qualified to run the business and the competence of your team. However, although you’re not required repay any of these funds, you are expected to give away shares in your business in exchange.

Loan-Based Crowdfunding

Meanwhile, Loan-Based Crowdfunding (or Peer-to-Peer Lending) also enables you to generate funds for your business by using an online platform to pitch to a community of investors. Like Investment Crowdfunding, this form of fundraising requires you to convince investors of the merits of your business, including your financial situation, business plan and the viability of your team. If you’re able to show that your business is a worthwhile investment, investors will pool their funds to form a lump sum, which must be repaid using a Fixed Monthly Repayment scheme, plus interest. Although though Loan-Based Crowdfunding is typically a short-term finance solution, some providers could offer agreements lasting up to 5 years.

Merchant Cash Advance

On the other hand, a Merchant Cash Advance could prove helpful if you’re able to accept credit and debit card payments from your customers. In order to apply, you must provide the lender with 3 or more of your business’ latest consecutive card sales reports, allowing them to form an advance based on your average monthly card-based revenue. One highly sought-after benefit of the Merchant Cash Advance is that it is repaid using a Flexible Monthly Repayment scheme. This means that the lender will automatically deduct a previously-agreed percentage from your future card sales, meaning your cash-based sales will remain untouched and your repayments will stay in line with your card sales.

Looking to invest in the future of your newly-established business?

Although starting your own business can be very exciting, it’s also going to be a very challenging time. In order to lay solid foundations for your business to thrive, develop and expand, ensuring that you have sufficient access to funding is going to be crucial. This is an area that could either make or break your business. However, there are funding opportunities available to help you take the next steps. Plus, once your business reaches its 2nd trading year, you’ll also start to find that the range of funding opportunities available to you are expanding as well. But with so many different products to choose from, sourcing an appropriate finance solution can be complicated, which is why speaking with a qualified business finance professional could prove vital.