Why Equity Funding is the best way to start your new business

In the ‘olden days’ if you wanted to start a new business you would go cap in hand to the bank manager and ask for a loan, usually with the caveat of putting something like your house up as collateral. It was a very risky way of financing someone’s new venture with an extremely heavy price to pay if the business owner couldn’t then keep up with the repayments.

Thankfully we now live in more modern times and there are a number of different ways you can fund your new business venture that actually carry a lot less risk than getting a straight up personal loan to fund it. With that in mind I thought it would be useful to look at

Grants

There are literally thousands of different types of small business grants available now matter what your startup requirements are. The tricky part can be not only finding them but also going through the application process. It can be a very lengthy process as a lot of people abandon it midway through due to how rigorous the whole thing is. The obvious major advantage of a grand over a loan is that there isn’t anything to pay back but it’s because of that that the checks are so detailed.

Community schemes

A whole range of Community Development Finance Institutions (CDFIs) have been set up around the country to help individuals and businesses who find it difficult to access, or perhaps have been denied, credit from banks and lending companies.

Community Development Finance Institutions provide help with everything from bridging loans and working capital to funds for property and equipment purchases. But their terms are usually restrictive: you tend to have to be either a micro-business or a social enterprise, and be based in a disadvantaged area to qualify.

Equity Crowdfunding

Equity Crowdfunding is, essentially, an extension of the charity sponsorship page you remember from being at school but this time it is in the business world.

People use crowdfunding platforms to basically people people to put money or buy shares in their new company which lets them raise capital during the early stages.

There are a number of platforms out there such as CrowdCube and Seedrs and even more ‘general’ crowdfunding platforms such as Kickstarter allow people to fund new projects.

The amount each company asks for tends to be different based on the venture in question with some asking for 10 people to put in £1000 each and others asking for 20 people to put in £500.

People come together, on crowdfunding sites, to pool money towards a particular venture or idea – it could be 10 people putting in £500 each or maybe 100 people to put in £100. This all gives the change for investors to spread their money across multiple startups and projects to reduce their chances of risk.

Equity Crowdfunding platforms also offer a great chance to get an idea of what the public will think of your concept or business. On top of that, it’s a very easy way to get some word-of-mouth marketing as investers more than not talk to other investors!

Collaborative Post