Your Business With James Caan 2017 - 58
is why angel funding is often referred
to in the finance industry as "equity
crowdfunding". Peer-to-peer lending
tends to be for more established
businesses and for bigger loans, while
angel funding is for newer businesses
and smaller amounts.
Websites such as Kickstarter and
IndieGoGo are ideal places to find
money for your business, as there are
no downsides such as having to pay
anyone back. Crowdfunding is a way to
appeal to armchair investors - people
with small amounts of cash to give to
projects they like the look of. It tends
to be used for creative projects such
as films, books and albums, but tech
businesses and social enterprises have
raised money this way too.
Be prepared to make a short video
plea for funding and offer rewards to
people who give small, medium or large
donations. As people aren't lending but
giving, your success depends on your
ability to sell your idea. If you can
persuade 1,000 people to give you £3
each, that could be the £3,000 your
business needs. You need to set a date
by which the money has to be raised by
and, just like on Dragons' Den, if some
of the target is pledged but you don't
reach your target, you don't get a penny.
For this reason, it's important you set a
realistic funding goal.
This is a lot like angel funding in the
sense that both involve funding in
exchange for part-ownership of the
business, but there is one big difference.
Angels are individuals, while venture
capital (VC) tends to involve funds with
large pots of money looking for new,
high-risk businesses in which to invest.
Whereas angels can make the
decision to invest relatively quickly,
VC funds can take a long time as they
are looking for companies in high-risk
industries that want large chunks of
money (typically more than £50,000)
and who are hoping to turn that into a
great deal more.
On the downside, a VC fund will
expect to get some control over
company decisions and a large portion
of the company's ownership in
exchange for their cash.
The government may be able to fund
where other investors can't, and grants
are available for new and young
businesses, if you know where to look.
Central government has money to fund
new businesses through schemes such
as the New Enterprise Allowance, which
aims to create 40,000 new businesses
over the next two years. Under this
initiative, unemployed people who have
been claiming Jobseeker's Allowance
for more than six months and want to
start their own business could receive a
support package of up to £2,000.
In England and Wales, locals councils
have money available to new businesses
if you can show a benefit to local
communities. In Scotland, similar is
available from Scottish Enterprise, a
non-departmental public body of the
Independent funding bodies, such
as the Nominet Trust and UnLtd, also
fund social enterprises. Lots of people
compete for these grants and the
applications can be time-consuming
and difficult. Just remember - it's a
marathon not a sprint.
Leasing equipment can be seen as
an alternative way of financing your
business. We're all aware of the benefits
of renting property instead of owning
it: it's more affordable if you haven't
got enough money to buy. The same
applies to business equipment such
as furniture, computers and vehicles.
Leasing allows you to use equipment
you wouldn't otherwise be able to
afford. It also means you can use the
money you would have spent buying
the equipment on other necessities.
On the downside, leasing can mean
you pay more in the long-run and
you're left with more admin to deal
with. You should also beware of getting
locked into inflexible agreements that
may be difficult to terminate. As ever,
always read the small print.