At the outset, one of the key things you must do is decide how to fund the start-up costs required to get your venture off the ground.
Here’s our guide to some of the different avenues you could consider...
1. Use your own savings
If you have a nest egg squirreled away, this may be the simplest way of funding your business, as you are not racking up any debt – and are only accountable to yourself.
The risk, however, is that if your start-up is not a success, you may end up with no savings to fall back on.
2. Talk to your bank
One of the most common ways in which people raise capital is by approaching their bank; banks may be willing to offer business loans specifically to help people fund their start-up costs.
A decent lump sum can be a real help initially, but bear in mind that you will need to provide realistic cash-flow forecasts, and be able to prove that you have a plan for paying the loan back – with interest.
Read our tips for applying for business loans.
3. Get family and friends involved
Your family and friends are likely to want to help you – and may even want a stake in your potentially lucrative business for themselves.
But be aware that borrowing from loved ones can put a strain on relationships, so make sure you they are only loaning money that they can afford to lose. Also insist on putting any lending agreement in writing.
4. Business angels
Angel investors are usually entrepreneurs who have made their own fortune, but who now want to invest their funds back into start-up businesses.
As well as offering financial support, angels can also provide advice and useful connections.
5. Venture capital
Venture capitalists or “private equity” companies are firms which aim to invest in early stage businesses with high-growth potential – and a strong sense of direction.
Crowdfunding is still a relatively new way of raising funds for your business, but it is becoming increasingly popular.
It essentially involves a large group of people investing in an idea, using their own personal funds. It is up to the individual how little – or how much – they wish to give you.
Read our guide to crowdfunding.
Aside from these options, you could also consider alternative sources of funding, such as “peer-to-peer” lending.
Peer-to-peer involves people loaning money to other individuals without having to go through a bank.
Lenders are everyday people who have money they want to loan in return for a competitive rate of interest.
This could be a helpful option if you find the banks are unwilling to offer a traditional loan to you for your unproven new business which has, as yet, no established credit.
8. Government grants and funding
There are a host of government-backed grants and funding opportunities available for small businesses that can help with initial funding while you develop your business idea – so check out what’s on offer here.
For more information on starting a new venture, visit the Federation of Small Businesses and Better Business Finance.
Read our guide to six things to do when starting up a business.