Q: What are my options for financing a business when I've got no capital of my own?
Feb 16 2011
Answered by: Simon Mosey Ask a question
One option could be to seek an investment from a Business Angel. These are typically high net worth individuals who are looking for investments where they can provide management support in addition to investment. They will usually look to invest in exchange for a share of ownership in the firm and often will stay onboard for the medium to long term. There are Angel Investor networks all over the UK so you should be able to find a group near to you. However be prepared to 'sell' your idea to the angels in a concise and enthusiastic way as they are really investing in you as much as the firm.
Some people turn to the banks for a loan but of course there are well-documented issues with this route that have frustrated many fundraisers in the past. Also be aware that if you choose this path then you will probably be asked to provide security against the loan. In practice this typically means securing the loan against your property which I would not recommend. While many businesses come up short when they approach the banks, the UK’s 'big four' have committed to lending £76 billion in new credit to small and medium sized enterprises in 2011. The total lending target of £190 billion for companies of all sizes is up from £179 billion lent in 2010, with the banks pledging to lend more if demand exceeds this figure, so the landscape should be set to improve.
A more contemporary option for financing is in the form of online marketplaces where people can lend directly to small businesses in the UK, which many find eliminates the high cost and complexity of banks. With such sites, many businesses can get lower cost finance to expand and develop. An example of such an option can be seen here.
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