7 ways to get startup funding for your business
So, you've got your big business idea and you know it's going to bring in the big bucks. But how do you raise the capital necessary to start your business?
Are you so confident in your new business venture that you're convinced you'll become a millionaire? That's a good start.
While we have every confidence in your exciting new quest, it's common for startups to fail at the first hurdle: getting startup 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 money to make your entrepreneurial dream a reality. If you're wondering how to raise capital for a startup, here are some ideas to get you started.
How to get startup funding
Here are some ideas on how to raise money for a 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. 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 startup funding.It's crucial you treat any friends and family who invest with professionalism and respect. Remember this isn't free cash! Keep your investors up to date on how their money is being spent and offer them regular updates on how business is progressing.
Crowdfunding for new business ideas is extremely popular nowadays (you could even crowdfund your degree!). 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 bigger 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 find startup funding 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. If you're serious about raising capital for your business, this is something you should look into.
Loads of students have benefited from government loan schemes for their businesses whilst still studying for their degrees – including two students who launched a reusable sanitary pad business.
You would be expected to repay the loan at 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 it or not, even your university could be interested in investing in your idea. They'll often 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 them too.
Try searching online for any young business competitions or funds associated with your university. You can also contact the uni careers department as they'll be able to point you in the right direction.
Fund it yourself
Easier said than done, right? But if you're 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, there are some awesome online banking startups that can help you save more. 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 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. That way, 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.