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Articles in Home | Finance

Financing A New Business





While the business environment in the UK has been fairly difficult for the last few years, even though the economy is thriving, there are still many would be entrepreneurs out there who have been considering opening their own business. For these new business owners, one of the main issues at the outset is funding and the various sources of finance available.

What Are The Sources Of Finance Available?

While there are many sources of finance available, some more obscure than others, the more general options include :-

Traditional Banking

Most new business people tend to look towards a traditional banking loan when setting up and running a business, with many of the financial giants having small business advisers to hand.

While this can be a very useful option for many business people, there are some drawbacks. To the banks you are just another customer, with very little personal involvement with banking advisers after your funds have been approved. While they may request accounts and paperwork on a regular basis, the majority of decisions from the majors are now carried out using basic risk formulas, etc.

While you may obtain a good rate for your business loan, they will no doubt require some kind of collateral which may put your house or other assets at risk.

Business Partner

While there is an old saying, “Never mix business and pleasure? many people tend to look towards people who they know and trust when looking for a business partner. This can often lead to many arguments and has been the cause of many a great friendship ending.

While there would be no cost to you, as such, for the finance, you would be required to reduce your overall share in the business, and your potential rewards. However, you would also be reducing your liabilities, which would be shared with your business partner. Providing that you are able to lay down some ground rules at the beginning of the relationship, this may be a productive option for some.

Business Angels

This is an option which very few people seem to consider these days, when looking for both advice and finance for a new venture. A business angel is basically someone who is willing to part finance a venture, for a significant share in the business, and offer their advice and assistance where required.

Many business angels are successful business people who have maybe retired, but are looking to keep an interest in any new ventures coming to market. While many would be entrepreneurs may be wary of trading part of their business for finance, there can be many added bonuses to a business angel.

In a world where knowledge can be just as valuable (if not more so) than finance, too few people seem to take advantage of this particular service.



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