How do start-ups secure funding? Part two

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Welcome back to the second post in our series “How do start-ups secure funding?”

We’ve got a couple of extra points for you, so without further delay…

Personal

Many start-ups need some personal funding early on, either from the founder(s) or their friends and family. Any personal contacts who do commit finances though will want to be sufficiently reassured that their money is in safe hands and will likely need convincing of the business goals, as well as how they will be achieved.

AirBnB and MailChimp are some of the most famous examples of companies which launched through personal funds, or ‘bootstrapping’.

There are some key advantages to bootstrapping – for example, if you have the funds to last for a lengthy period of time, you can save a lot of effort trying to attract the attention of investors and instead spend more time focusing on your core business objectives.

Also, it matters more when it’s your own money and there are few more powerful incentives to succeed than the fear of running out of your own resources.

Loans or grants

The other main option is to take out a loan. Most start-up founders will go to the bank but some will take a loan from the government – the Start-Up Loans programme, offered by the Department for Business, Innovation and Skills, provides an average loan of £5,222.

Some will also be lucky enough to secure a grant – these are on offer from a variety of sources including councils, charities and lotteries.

However, whoever provides the loan or grant will want to see a convincing business plan, one that demonstrates why the start-up merits the funding over all other applicants.

In summary, funds for your start-up are available from a variety of sources – but they have to be well earned and competition for finance can be fierce.

In all cases, an impressive business plan greatly improves your chances of securing funding and how much you will receive. Whoever is investing – whether it’s a business angel or venture capitalist, a ‘crowdfunder’, a friend, a bank or the government – will want to be convinced of the financial viability of your business.

The best way to demonstrate this is to show a sales or profit forecast, supported with evidence.

Letting Applied VC write your business plan gives you peace of mind that it will do your business justice and as chartered accountants, we are well placed to ensure the accuracy of your financial forecasts too.  To find out more please call today on 020 7099 4963 or email us at info@appliedvc.com.

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