7 ways to raise capital for your startup business
So you’ve got your big business idea and you just know it's gonna bring in the big bucks. But how do you convince other people to give you the money you need?
Are you so confident in your new business venture that you're convinced you'll become a millionaire? That's a good start!
But while we have every confidence in your exciting new quest, it's worth being aware that it's pretty common for startups to fail at the first hurdle: getting funding.
Starting a business as a student requires a lot of hard work and commitment, and perhaps most important of all it requires getting your hands on some dosh to make your entrepreneurial dream a reality. Here are some ideas to get you started!
How to fund a startup business
Ask friends and family
For most young entrepreneurs, the first investors to take an interest in their big ideas will be their parents, family and close friends.
And with your friends and family having a small stake, they’ll be more inclined to offer invaluable (and honest) feedback on your business or product, as well as promote it through word of mouth.
It's a good idea to make this your first port of call, as if you find there's someone in your life with a secret stash of cash they're willing to invest in your business, you may not need any other funding!
Crowdfunding for new business ideas (and tuition fees!) is extremely popular nowadays, and it's a pretty effective way to make cash – provided you have an interesting idea that will capture public interest.
The most well-known crowdfunding websites for startups are Kickstarter, Seedrs and CrowdCube. Bear in mind these sites all charge a fee of 5–7% of what you raise (plus an additional fee for processing your payment), but these fees are only deducted if you reach your funding target.
The potential to raise capital here is huge, and some of the biggest success stories in the UK startup scene began on crowdfunding sites. However, you might be better off looking to raise a smaller amount of seed capital and giving away a bit more equity, since the risk for potential investors is high.
Having a solid profile on these websites for your business is crucial. After all, this is all your potential investors will be judging your business on, so make it shine!
Approach angel investors
Angel investors are essentially people with a lot of cash (normally very successful business people themselves) who want to invest in the next big idea. Think Dragon's Den, but without the sneering and shady comments!
Best of all, angel investors are about more than just a decent slab of cash to help with your business. They'll even mentor you throughout your adventure, offering advice when you need it and warning you against common mistakes they've seen being made time and again by small businesses.
How to get the attention of angel investors is another matter altogether. A quick Google should throw up some ways of getting in touch with investors, but the UK Business Angels Association website is a great place to start too.
You should also keep an eye out for any pitching events and conferences where investors are likely to be, and enquire about pitching your product. Remember that smaller events can be just as effective as the big time ones – and you should never have to pay to pitch!
Try the government's startup loan scheme
Perhaps the quickest and most straightforward way to raise seed capital is through the government-backed startup loans scheme.
The scheme is specifically aimed at young entrepreneurs, offering loans of between £500 and £25,000 to get your business venture up and running.
Loads of students have benefited from government loan schemes for their businesses whilst still studying for their degrees – including these guys.
You would then be expected to repay the loan a rate of 6% per year over a maximum of five years – which is a decent deal as far as business loans go.
You'll get free support and guidance when writing your business plan, and if your application is successful, you’ll also get a mentor for 12 months (again for free!).
Look into university schemes and competitions
Believe or not, but even your university could be interested in investing in your idea – and will often even have cash set aside for budding entrepreneurs like you!
There's nothing universities love more than nurturing the entrepreneurial spirit in their own students, and if your business is a success, it's great PR for the uni too.
Try searching online for any young business competitions or funds associated with your university, and make sure you contact the uni careers department – they'll be able to point you in the right direction.
Fund it yourself
Easier said than done, right? But if you're really serious about getting your business up and running, you should be trying to put aside some cash to help fund it if you can.
We'd recommend setting up a student savings account with the sole financial goal of backing your business idea. Deposit any spare cash that comes your way into this account and leave it to grow with interest.
Funnily enough, one of the best interest rate currently on the market is offered by an online banking startup! Find out more with our guide to automatic savings apps.
Ask for a bank loan
We've pushed this one to the bottom as it's a lot harder to get accepted for a bank loan as a young person, making the above options a lot more realistic if you're still at uni.
Being accepted for a loan would rely on you having a good credit rating, and an extremely solid business plan. This is basically so the bank can be sure that you'll be able to pay them back when the time comes.
That said, if you get working on that business plan and perfecting your credit score, a business bank loan could be well within your reach!
If you don't need thousands upon thousands to get your business started, check out our guide to making money quickly – it could do the trick!