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Choosing a Start Up Business Loan

Starting up a new business can be a very exciting time for an entrepreneur. But aside from the glory there will usually be a period when you’re investing lots of time, effort and money before you start making a profit. You might be able to get help from a government-backed support scheme if you need some initial funding to test and develop your business idea.

Starting up a new business can be a very exciting time for an entrepreneur. But aside from the glory there will usually be a period when you’re investing lots of time, effort and money before you start making a profit. You might be able to get help from a government-backed support scheme if you need some initial funding to test and develop your business idea.

Avoid any waste and do important research on your market to make sure your customers will pay for your product or service. When you have the confidence in your business plan, explore different sources of funding to help with the costs of starting up your business.

There is a good option, called the Start Up Loans, which is a government-funded scheme that funds and mentors entrepreneurs. Anyone who is a UK citizen and is at least 18 years old is eligible to apply for a Start Up business loan.

In this scheme, the borrower will have a delivery partner assigned by the Start Up Loans Company, who will help you develop a business plan. This will be assessed and funding to be given to the business is decided by the Start Up Loans Company.

New businesses that have been approved to get a Start Up loan will be given a low-cost unsecured loan, business mentoring and a range of business support products. Borrowers must agree to a fixed rate of interest and must be able to pay the loan back within 5 years. There is a capital repayment holiday available for businesses but this includes an interest each month.

Other options for funding your start up business needs:

Bank loan – They usually provide secured business loans, where borrowers are required to pledge collateral such as personal properties and assets.

To get approval for a bank loan, you’ll need to be able to give the bank realistic cash flow forecasts and submit proof that you’ll be able to pay back the loan with interest. You should think carefully about how much risk you’re willing to take on before you get a loan or give any personal guarantees.

Selling shares – This is for businesses that need larger investments. In this type of funding source, the business owner raises money by selling shares in your business. You can do this by getting friends and family to invest. However, if this isn’t enough you can look for sources of ‘equity funding’, including:

  • ‘Business angels’ – they are typically wealthy individuals who invest in start-up businesses.
  • ‘Venture capital’ - is from companies who invest large sums of money in businesses that they think will grow quickly (known as ‘private equity’ companies).
  • ‘Crowdfunding’- an alternative funding where a large group of people invest money in a business idea, usually done through the internet.
  • Other alternative sources of funding like ‘peer-to-peer lending’ - lends money through online services that match lenders directly with borrowers.

Any outside investors will own the company jointly with you and the other founders. They have a say in the running of the company, and are entitled to get a share of the profitsComputer Technology Articles, known as ‘dividends’.

It is important to consider getting legal advice from a solicitor before selling shares in your business.

Bizangels Network

Source: Free Articles from ArticlesFactory.com

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