investment partnerships

Getting Business Funding Is Easier Than the Dragons Den

Real World Funding for Entrepreneurs

There is a wealth of opportunity for today’s entrepreneurs to fund their business dream without having to face the ridicule of the TV Dragons.

Dragons Den has been one of the TV success stories of the past decade, and has been the inspiration for the similar Shark’s Tank in the USA. But while it has made plenty of money for the broadcasters, this is, at heart, entertainment first and business funding second.

Back here in the real world, there are certainly angel investors around, and according to research by Nesta, they make around 22 percent per annum. In today’s economy that is stratospheric compared with other forms of investment, but as any business finance brokers in Essex will tell you, that means they are extremely choosy about the businesses they invest in.

Fortunately, the businesses themselves can afford to be choosy too. There are plenty of other ways to raise finance, so let’s take a first principles approach.

Look before you leap

Before you start searching for investment, it’s vital that you lay the groundwork. You must understand your business completely, and have a clear vision of what you need and why you need it.

A carefully crafted business plan, complete with realistic projections for the medium term is the perfect way to wrap it all together. Take your time over it, and don’t be shy about asking friends and associates for their input.

Government initiatives

The government has been vociferous in its support for entrepreneurs and there are numerous government grants available for a variety of purposes. This is why it is so important to be clear about how much you are after and what you need it for.  Most grants will match the amount that you are willing to put in so if, for example, you are seeking a £10,000 grant, make sure you have the same amount available.

There are also government-backed business startup loans whereby you can borrow up to £25,000 at a rate of interest that is vastly lower than anything you would find from a conventional lender. The typical repayment period is five years, and you also get some free business mentoring for the first 12 months as part of the deal.

Do you really need a loan?

Most small business and startup owners look at debt financing, or loans, in the first instance. It’s a logical enough place to start, and most of us are familiar with how it works from our domestic experiences. But for a new business that has no history or track record, it is not necessarily the best choice.

It could be that equity financing represents a more sensible option. There are tax relief opportunities that can help make your business a highly attractive proposition to some investors. Examples include the Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS), both of which permit investors to receive significant tax breaks.

Another form of equity financing that might be worth considering is crowdfunding via a platform like Crowdcube. Just be aware that this type of funding works better for some enterprises than it does for others. It is most effective with consumer-facing businesses, but it takes energy and involvement to really make it work.

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Larry Walker

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