best method of securing funding for a new business?

seismicryan

After reading a few other threads this thought came to me, and wondered what everyone here thought are the best ways for a "potential business" to look to raise funds to start?

Banks? Investors? Grants?

What % of the total required capital would you suggest a potential business should have raised them selves before approaching a bank?

I would like to hear people's opinions on this..

Ryan

chalkie99

Grants few and far between. Your bank would be a good place to start with a properly prepared business plan and 50% of your own money.

paulwf

It might depend on the type of business. Venture capitalists might invest in high risk but potentially high return businesses that can eventually be sold on for a profit. More "traditional" businesses won't attract VC but will be more attractive to banks.

Assuming it is what I would call a normal business banks will look for a third invested by you and security (usually a house) to cover the remainder and will probably only consider a fairly short loan term e.g. 36 months.

What will help a huge amount is something concrete to prove the concept will work and the figures are accurate. Perhaps a pilot scheme or data from a branch in a neighbouring town or something like that.

Edit: why not approach a bank you aren't interested in and have a chat with them to see what is required? Use that info to then approach a bank you do want to attract.

jexygirl

depends atm on what is being loaned on and you dont say what that is so its hard to offer advice - as Paul says it depends on the type of buisness and without further info its hard to advise.

Take that you need to raise one third of start up costs - that isnt buisness as you see it - thats start up - inc rent in advance, buildings contents and PL liab insurance, stock at value, legal fees, cashflow etc.
A buisness you see on offer at 60k lease will have around another 20k costs to buy all told with everything considered.

If its a new buis starting from scratch from home there is little funding around so start small with what you have and use it to build. IF you have nothing, work with that - you have you and you can make it work if you want to
Jex

chinup_3

If you have a close relative over 60, would lend you they money if they had it, and own their own house= Equity Release , and then pay them back ie have something drawn -up for mutual protection if need be.

chalkie99

chinup wrote: »

If you have a close relative over 60, would lend you they money if they had it, and own their own house= Equity Release , and then pay them back ie have something drawn -up for mutual protection if need be.

Sorry, I think that's a shocking suggestion.

What mutual protection is there when the business goes down the tubes?

seismicryan

chalkie99 wrote: »

Sorry, I think that's a shocking suggestion.

What mutual protection is there when the business goes down the tubes?

agreed about this!

Thanks for the feedback guys... i was thinking of general advise for anyone starting a new business really..

I myself started my own business (though I have been self employed for years on a small scale) a couple of years ago, and went to the bank to see about funding and they were pretty useless, so I got investment elsewhere and everything was fine.

I have been looking to expand however, or rather move into a new arena with my business, connected to the same line of business, just in a different way...

The new direction would require huge investment, so even though I am certain it will be very successful and profitable, I just dont see how I could even get funding for it.

It is not what I am looking into, but imagine you wanted to build a leisure centre, and it was going to cost you £1,000,000.... it is unlikely you could drom up £300k and have a house in order to interest the bank, so how do people who start these sorts of business get started?

Ryan

Horace

I started my business from scratch with zero funding - all I had was an old laptop which I still use, I bought a domain and stupidly spent a fair bit on a website that I couldnt update myself - I soon learnt my lesson. I have a mobile phone and started PAYG but now have a contract.

You don't need much when you start out and vistaprint cards are ok for a start until you can afford something better.

Although I am starting to earn money now, I don't consider myself to be rich (I am not by any stretch of the imagination) and I recently set up another business which is taking time to launch - again done from scratch.

I have had to live on my wits because I know there is no funding out there, it hasnt been easy it has been tough but I survived my first two years in business..if I can do it then someone else can without having to rely on grants or loans. It is my policy never to have a business loan or even a personal one.

mizzbiz

Generally, if you wanted to build a leisure centre for £1m you would have the funds to do it. It would be through a contract or some such vehicle with interim payments to help you fund it but it would be expected you had the liquid assets to get going int he first place!! Your client would certainly require this.

A member of my family has developed a hi-tech product with a partner. They have spent two years trying to get funding from investors - most expected them to have re-mortgaged their homes and ploughed all their savings in before they would touch it. They also wanted jaw-dropping stakes in the company. They are finally ready to go to production but it has been a long, long scary road and I believe the end source of funding has been a license agreement.

GoodNewmover

seismicryan wrote: »

After reading a few other threads this thought came to me, and wondered what everyone here thought are the best ways for a "potential business" to look to raise funds to start?

Banks? Investors? Grants?

What % of the total required capital would you suggest a potential business should have raised them selves before approaching a bank?

I would like to hear people's opinions on this..

Ryan

Much more difficult to get a loan from the bank for a new business than it is to get a loan for a car. You have to be clear on what you are going to use the loan for. You've got to demonstrate ability to repay that money back (interest added too).Bare in mind some banks will demand you adhere to a series of terms you must agree to...or they will demand immediate repayment of the loan.

Horace wrote: »

I started my business from scratch with zero funding - all I had was an old laptop which I still use, I bought a domain and stupidly spent a fair bit on a website that I couldnt update myself - I soon learnt my lesson. I have a mobile phone and started PAYG but now have a contract.

You don't need much when you start out and vistaprint cards are ok for a start until you can afford something better.

Although I am starting to earn money now, I don't consider myself to be rich (I am not by any stretch of the imagination) and I recently set up another business which is taking time to launch - again done from scratch.

I have had to live on my wits because I know there is no funding out there, it hasnt been easy it has been tough but I survived my first two years in business..if I can do it then someone else can without having to rely on grants or loans. It is my policy never to have a business loan or even a personal one.

Yep, alot of people feel better doing that. Successfull british born business owners from different backgrounds like Hermione Way or Samata Angel used their uni loans to start their business. Christian Owens started his with his pocket money, he now makes 700,000/yr.:)

seismicryan

Horace wrote: »

I started my business from scratch with zero funding - all I had was an old laptop which I still use, I bought a domain and stupidly spent a fair bit on a website that I couldnt update myself - I soon learnt my lesson. I have a mobile phone and started PAYG but now have a contract.

You don't need much when you start out and vistaprint cards are ok for a start until you can afford something better.

Although I am starting to earn money now, I don't consider myself to be rich (I am not by any stretch of the imagination) and I recently set up another business which is taking time to launch - again done from scratch.

I have had to live on my wits because I know there is no funding out there, it hasnt been easy it has been tough but I survived my first two years in business..if I can do it then someone else can without having to rely on grants or loans. It is my policy never to have a business loan or even a personal one.

This is how I started my existing businesses, but I am thinking more of a businesses that cannot be started without a large capital investment...

It appears that the only way is through investors... Imagine you wanted to start your own cinema... you would need to get investors, then go to the bank for the rest... you would end up owning 5% of your own business!