So, you want to start your own business but you don’t have the money to get things going? Where can you go to get a startup loan that will help you start your business empire? In this post, we are going to look at the traditional, and not-so-traditional, ways of getting a startup loan.
Make Sure You Are Properly Prepared
Before you start to make applications, you need to make sure that you have all your ducks in a row. There is little point turning up for a business meeting, where you are going to be asked for details relating to every aspect of your future business, if you clearly haven’t thought it all through, and don’t have the facts and figures at your disposal. That’s not going to persuade anyone that you’re worthy of a loan.
The first thing you, therefore, need to do is write a detailed business plan. One of the best places to find business plan templates is on the UK government website https://www.gov.uk/write-business-plan. You can find other templates such as cash flow forecasts there as well. The site contains examples of good business plans and training on how to write yours.
Securing Your Start Up Loan
Okay, let’s jump ahead and assume that you have done everything you need to do vis-a-vis paperwork. Your next step is to set up some meetings to try and obtain your start up loan. So, where are the best places to look for a loan?
The High Street
Probably the most traditional places to seek a start up loan are high street banks and building societies. You may need to visit a few to increase your chances of getting a loan. This is because the banks and building societies are notoriously cautious about giving out loans these days.
Still, there are a lot of advantages to getting a loan from the high street. Many will want you to succeed, of course, so will do their best to help you. And because you are focussed on your product or service, they’ll be focussed on your business.
It’s been said that “individuals don’t build great companies, teams do.” If you’re starting out on your own, you might not have a team yet. But, by getting a startup loan from a building society or bank, they will become part of your team and can help you succeed.
Get an Overdraft Facility
This one isn’t necessarily an option for startup finance but it’s worth looking into if you have good credit with your bank as it is not particularly difficult to arrange. Having a good credit history and showing that you are worth a gamble, can really help increase your chances of success.
Having said that, overdraft facilities are usually primarily based on your business’s accounts and its order book. In other words, if you are starting completely from scratch, this one may not be a good option.
Still, one of the best things about having an overdraft facility is its flexibility. You may be given access to an overdraft of £5,000 but you might end up only needing £2,000 of that. So ultimately, you have much more control over exactly how much you borrow and therefore, how much you payback.
If you have run the gauntlet of the banks and building societies to no avail, do not give up. The problem with traditional lenders is that they have traditional mindsets. This means that they have to follow a set of ‘rules’ that don’t often allow them to be as flexible as many startup businesses need.
Independent lenders do not have these same restrictions. However, it’s important not to make the mistake of thinking that you can just rock up with a hope and a prayer expecting to succeed; that’s not going to happen. You still need to have all your paperwork, including business plans and cash flow forecasts, in order.
However, independent lenders will look at you as well as your paperwork. They will be able to take a more flexible view of your business idea and may well lend you the money that the banks and building societies would not. Just be prepared to sell yourself as well as your ideas.
Join the Crowdfunding
Crowdfunding feels like it’s been around a long time but it hasn’t. In fact, the first instance of crowdfunding was by a British rock band in 1997. The first crowdfunding site didn’t start until three years later, and crowdfunding only started to become really popular in 2013.
While there are some great opportunities for raising funds through crowdfunding, this is not a traditional startup loan. If you’re lucky, you’ll get a lot of people ‘investing’ small amounts of money who do it just to help. However, you’ll have to offer something more substantial for people who are prepared to offer larger funds.
You may also attract the attention of Venture Capitalists. The offer of a venture capital investment may initially seem very attractive, however, be warned; if they come bearing big money, they will expect a share and maybe even a controlling interest in your business.
To summarise, there are plenty of options available if you are starting out in business and require startup finance. Not all of them will fit what you want to do, however. For example, crowdfunding is great if you have a cool new product or service, but if you want to set up a plumbing firm, it’s probably not for you.
However, no matter what you want a start-up loan for, you’ll need a strong business plan and a solid cash flow forecast. You will also need to learn how to sell your idea and yourself. And finally, you will need to take each rejection in your stride. Success is rarely achieved overnight, and, as some of the world’s most successful entrepreneurs will testify, it can sometimes take a failure to build success.