Finding money to start a business

Whatever you might read in self-help books relating to business start-ups, it is very unusual to find a successful business that started with no capital funding whatsoever.

Even those that claimed to have done so, when examined in a little more detail, will usually have started with some sort of capital injection from the sale of an asset or helpful family members etc.

So, it’s contended here that in most cases when trying to get the business off the ground, you’re going to need some money. That money might normally be required to support different phases of your business evolution:

  • seed money, sometimes called conceptualisation – this is sometimes a relatively modest amount of cash that just allows you to do some proof-of-concept market research and model building.  It may or may not result in you deciding to go forward to subsequent phases;

 

  • mobilisation – this is typically a more substantial sum required to help you get your business put together and up and running.  It might include costs associated with renting premises, purchasing stock, building a website and taking out advertising etc.;

 

  • business expansion – once again, this might be more substantial funding typically needed in situations where your business is going from strength to strength and you want to build upon that and grow it accordingly;

 

  • cash flow – even the biggest and most successful multi-national organisations are occasionally hit by periods of time where they have rather more money going out than coming in.  That is called a cash flow problem and they may well borrow in order to bridge the gap until their next tranche of income arrives.

So, where to find such funding?

Depending upon the sums of money you require, it might be possible to use some of the short-term lenders such as www.wonga.com to help with some initial seed money and possibly to cope with the odd cash flow challenge.

Of course, their market might be individuals and small businesses, so if you are looking for multi-million pound injections then you might need to look elsewhere.

There are special venture capital and so-called investment angels who are often willing to take a chance on new businesses and who might be willing to help with seed money. The conventional banks may do likewise but they may be more oriented towards larger sum lending aimed at things such as the mobilisation and business expansion phases.

As you might imagine, if you are looking for substantial sums for any of the above phases, then you will need to show that you have a very good business plan in place or at the very least, an in-depth grasp of your ideas and the market you are considering delivering them into.

You should be clear that whichever of the above phrases you are in, lenders may be immediately and irretrievably turned off by poorly thought through propositions or business owners who seem not to have a firm grasp of the facts and figures relating to their business or the market they are operating in.

So, know your stuff thoroughly before asking for any form of loan!   For more information on business funding, visit the Government site, too.

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