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An introduction to the types of finance options available to you including private finance, sponsorship and public funding.
When thinking about how to finance your work, you may find it easier to identify a source of income for certain areas compared to others. However, you’ll likely need money to:
There are several ways to finance your business activity and projects and it’s important you understand the different options available.
The most common types are:
Before you start planning your project you’ll need consider how others will value your work and who would buy or fund your idea.
To get funding you normally have to submit an application supported by a plan – and show how your business has been spending its money.
You’re competing with lots of other businesses for funding so it’s important to show your potential funders:
Before you approach a funder or investor, protect your work as Intellectual Property by copyrighting, patenting or trademarking it.
If you find a funder, carefully consider the benefits and challenges the opportunity presents and whether it’s suitable for your business.
Banks can offer your business an overdraft, loan or Enterprise Finance Guarantee – supported by the Department for Business Innovation and Skills. If you require a small amount of money – typically less than £5,000 – they may suggest a credit card.
Banks consider your application based on a risk assessment of your business and your ability to repay. So it’s important you understand your own financial accounts, forecasting and analysis well enough to discuss it with a bank manager.
When thinking about the amount of money you require, ask yourself:
Bank managers are more likely to support your business if they fully understand what you do. So when you approach a bank for funding, ensure you have a business plan that:
Banks make decisions purely on a financial basis. So don’t be discouraged if you’re not successful the first time you apply. Sometimes you have to revise your business plan to get a commitment to investing in your business.
There are a lot of different banks to choose from, so ensure you feel confident in your bank manager.
These certified investors give their own capital to your business. Business Angels (BAs) are hands-on, so if you want complete control of your business, this isn’t the option for you. In return for their investment, BAs normally expect you to:
If you have a business with a high potential to make money, BAs might be interested in you. However, investing is a risk, so you need to provide a focused business and marketing plan.
Remember, BAs receive hundreds of applications and invest in very few – so make your business plan stand out and highlight your unique selling points. Creative, clever marketing can cause a buzz about your business – even before you present your business plan.
To attract a sponsor you need to show how your project will succeed, and provide a focused marketing plan. You must also try to prove that your project, marketing, and audience or client base fits with their marketing needs.
It’s best to establish a relationship with possible sponsors, rather than asking them for money as a stranger, or for a single event. This allows them to understand what you do and how they can be involved in the ongoing growth of your business.
Your sponsor also needs to know exactly how much money you require, why you need it and if you’re approaching other potential sponsors. Some prefer to be the only sponsor to avoid competition.
Grants and loans are popular sources of public funding for start-ups and projects.
Most funding from public sources, trusts or charities depends on your individual situation, and the circumstances of your project, business and your audience or client base. Each funding scheme has different criteria and usually can fund only a proportion of your project’s costs.
The competition for this type of funding is high. Funders need to be convinced that your idea is sound, fits with their aims and will be carried out competently.
Before approaching a public funder ensure you can:
Some funders will want your business to operate within a specific legal set up that provides an accountable management structure. But it’s best to make decisions about your legal status and objectives based on your own business needs, rather than be swayed by your choice of grant.
Think carefully before you accept financing. Ensure you’re happy with the structure and can manage any additional administrative costs and paperwork. Don’t limit your options or creativity because of funding obligations.
Be prepared to spend time on research for this type of funding, as schemes, deadlines and criteria change regularly.
Crowdfunding aims to raise a large pot of money from lots of little investments or advance sales.
It allows people to invest or donate a sum of money to help get your particular idea or project off the ground. Outstanding marketing is essential to raising money for your project this way. And as the name suggests, you need a crowd to make it viable. It’s best suited to projects with some or all of the following:
People want to know what they’re investing in so provide clear objectives, tell them what their money does and how people can benefit from the project or activity. Also be clear about what you’re offering in return because you need to be able to deliver on this – your credibility is at stake.