Funding your own business
You've done the sums, so how do you go about raising the funds needed to start your own business?
1. Create your business plan
This should always be your first step, so if you haven't created a business plan, get one sorted before you go any further. Gareth Veress is an adviser for Business Link, a free government-funded service offering practical advice about starting your own business. "The first thing any young person looking to start their own business should do is draw up a written business plan, which many people have never even thought about," he says. "If you don't have a written business plan, banks won't look twice at you."
If you need help getting started contact Business Link for practical advice tailored to your situation. Their advisors may also be able to refer you to enterprise support organisations which could help with funding, action plans and guidance.
2. Find local help for small businesses
If you're under 20 it's worth getting in touch with your local Connexions centre where you can find out about any local initiatives in your area that can help launch your business. Your local authority should also be a port of call - most councils have economic development teams offering help and there are often funding opportunities going spare for community-based, creative or heritage projects with grants of £500 or more.
3. Approach banks for a business loan
With a robust business plan, you can approach any high street bank and ask about their business loan rates and freebies, such as business guidance to get you started. Just make sure you get the best deal, says Gareth: "It's vital to be forewarned on the risks of borrowing money. Make sure you take advantage of the experts offering you guidance, because they're out there, they're free and they could be your saviour!"
There are hundreds of bank loans out there and interest rates vary from around 5% to 20%, so look out for the APR (annual percentage rate). Plan how much you need to borrow and work out how much you can definitely afford each month in repayments. To make sure you're getting the best loan for you, talk your options through with an advisor, compare like-for-like quotations and check the smallprint before applying. Remember that there are lots of other ways to get funding, so a bank loan doesn't have to be your only port of call.
4. Explore other ways to finance your business start-up
Prince's Trust
Prince's Trust provides mentors, guidance and funding for unemployed people aged 18-30 who want to start a business but can't raise all the cash needed. After serving time in Holloway prison, Eugina Moffatt was accepted onto the Prince's Trust Business Programme which helped her set up as a florist and open her shop Blooming Scent in Tottenham. "Applying was easy - I was just honest about what I wanted to do," she says. "I was given a £4,000 loan which helped greatly, but the input and aftercare Prince's Trust gave was even more valuable. I had help with promoting my business, tax and pointers on writing my business plan. Money comes and goes, but that help will stay with me forever." Blooming Scent is going from strength to strength and now Eugina is setting up a catering business alongside her shop.
Prince's Trust Business Programme can provide:
- A low-interest loan of up to £4,000 (£5,000 for partnership)
- Ongoing advice from a business mentor
- A wide range of services - including a free legal helpline
- A grant of up to £1,500 in special circumstances (subject to local availability)
If this sounds like the option for you, apply using the online form.
Shell LiveWIRE
This is a not-for profit organisation supporting entrepreneurs aged 16-30. It offers:
- A networking and discussion forum for young entrepreneurs
- A monthly competition for young people to win one of up to five £1,000 prizes to develop an unusual business idea
- An annual chance to win the Shell LiveWIRE Entrepreneur of the Year award, with a prize of £10,000, and heaps of media exposure for your business
To get involved, just create a free account on the website and then create a 30-second elevator-pitch video about your business ideas. This is what Nicky Gray did. She was the North East regional winner in 2007 for setting up her soft-play area and café, Kiki's Kabin, at the age of 20. "I'd advise any young person setting out to be careful with market research and budget well - those figures have to add up for the business to work," she says. "Find out if the business is viable. Be passionate about your idea, drive it forward and it will happen!" If you're planning to apply to the LiveWIRE scheme and create your own video, she says it's vital not to use jargon, to sell yourself and be memorable.
Other funding avenues and support for new businesses
- Because You Can is a start-up support forum based in Wales
- Community Development Finance Association represents institutions which provide loans and support
- FunderFinder is an online source for funding for all types of projects and also offers advice on applications
- National Business Angels Network is a directory of small-scale equity investors
- The National Federation of Enterprise Agencies is a directory of local enterprise agencies which could be waiting to help you
- Scotland Business Gateway offers practical help and support to Scottish entrepreneurs
- Striding Out offers help every step along the way, from developing and planning your idea to growing your business
Written by Liz Nicholls
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