How to finance your business venture – 5 ways to help you

How to finance your business venture

When it comes to building a business from scratch, learning how to finance your business venture effectively is of prime importance.

Much like building your own house, taking responsibility for every element of the business project makes it seem that much more special and far more personal than you could ever have imagined. Of course, similar to constructing your own home, laying solid foundations is essential and being able to source the necessary funds to get things off the ground is key.

For many, a business idea will require an injection of financial resources in order for operations to begin. Overheads such as raw materials, staff, property, etc. will need to be covered while the fledgling business struggles to find its way.

What, then, are the options when it comes to the question of how to finance your business venture?

At THP Chartered Accountants, we aim to provide our clients with the advice they need to help secure the funding necessary to make their business a success.

Here are the five top ways of funding a new business venture:-

Savings

Depending on the nature of your business, it is quite possible that any start-up costs may be minimal, particularly if you are able to work from home and do not require large amounts of products or raw materials to get under way. Many digital businesses, for example, epitomise the ‘bedroom startup’ nature of some of the world’s most successful global companies.

In these cases your own savings may be sufficient to cover the low overheads needed to kick-start the business.

One of the great things about setting up your own company using money from your own resources is that you retain control of the business by not having to cede equity to anyone else. As your business grows, you have the luxury of remaining the beneficiary of this expansion, retaining control, and following your personal vision for taking the business forward.

Crowdfunding

As one of the more modern forms of capital generation, crowdfunding is a great means for digital-savvy entrepreneurs to reach out to others and secure investment. With crowdfunding networks such as Crowd Cube and many more platforms available, you can pitch your business ideas in front of many interested parties.

It could be argued that raising money for your startup has never been easier.

The idea behind crowdfunding is simple; seek different levels of investment from the public instead of high net-worth individuals or organisations. By opening up the opportunity to invest to a wider audience, you can obtain high amounts of funding without having to rely on a limited number of investors. In addition, you can set the scope of the investment to be sought and also the benefits each investor receives in return. You could, for example, even choose to only accept purely donation-based investments to obtain the valuable funds you need without giving up any control.

The target-based nature of crowdfunding also provides a level of security to investors. Should the target amount not be achieved, all invested funds will be returned to subscribing investors. As such, it pays to set a realistic target in order to avoid potential damage to your reputation by failing to achieve your stated objective.

Venture capital for financing your business

A more traditional form of financing your business venture is through venture capital firms. These organisations are formed by a number of wealthy private investors who are looking to invest in businesses showing high growth potential during their early stages. These organisations focus their attention predominantly on working through financial institutions and will seldom be in the market for ‘small fry’ operations. They are looking to invest millions of pounds with the expectation of achieving exceptional growth over a short timescale.

But working with a venture capital firm has its drawbacks.  You will likely be relinquishing huge amounts of control of your business to others. What’s more, since the focus will solely be to run the business to maximise profits, you may find the ethos of the business you founded is lost in the need to make money fast.

Angel investors to finance your business?

Angel investors work on a similar principle to venture capital groups, albeit on a smaller scale and often as single, private individuals parting with their own money. The best way to discover how angel investors operate is to watch an episode of the BBC’s acclaimed show, Dragon’s Den, where hopeful business owners get the chance to pitch to a number of well-known business leaders.

Pitching your business proposal to individual investors with available funds is not only a great way to hone your expertise in developing your company but also results in a number of additional benefits. Quite apart from recruiting an investor with money to spare, you also have the opportunity to capitalise on the extensive business experience these individuals have accrued throughout their lives. More often than not, angel investors are successful entrepreneurs in their own right and know precisely what it takes to rise to the top after starting out at the bottom.

Small Business grants

A fifth and final option for those looking for start-up capital is the small business grant. A number of schemes are available for those looking to kick-start their businesses, including The Prince’s Trust which sets its stall in supporting those young business minds aged between 18 and 30.

Depending on your industry and the location of your business, the grants available to you will vary and the process for securing funds can often seem arduous. However, provided you are dedicated and meticulous in completing your application and supplying all the necessary supporting material, a small business grant may well be all the investment you need to turn your business goals into reality.

However you plan on taking your startup business to the next level, the team at THP Chartered Accountants will be able to offer all the support you will need.

Get in touch today for more details.