1. Personal Investments<\/strong><\/h2>\n![\"blog_saving-payroll\"](\"https:\/\/www.clearbooks.co.uk\/wp-content\/uploads\/2016\/01\/blog_saving-payroll.png\")
<\/a><\/p>\nThis is the most common type of investment for small businesses. After all, it\u2019s the easiest to access since you don\u2019t have to apply to a bank or another source of funding, and there\u2019s no interest or collateral required.<\/p>\n
Friends and family can be another source of investment, but it\u2019s very important to allow for the possibility of failure. No matter what your relationship is like with a person, get a solicitor to help you create an investment agreement. Better to have everything out on the table to begin with than to run into trouble later and ruin a relationship.<\/p>\n
Pros<\/span><\/strong><\/p>\n\n- You retain total control over your business.<\/li>\n
- You don\u2019t have to apply for a loan through a bank or similar institution.<\/li>\n
- If you apply for other funding on top of your own investments, other investors will want to see that you\u2019re willing to invest in your own business.<\/li>\n<\/ul>\n
Cons<\/span><\/strong><\/p>\n\n- You may lose your money, so you have to budget carefully and realistically.<\/li>\n
- If you have personal investments from friends and family and they don\u2019t work out, you can ruin those relationships.<\/li>\n
- You probably won\u2019t have access to as much funding as you would with other types of investment.<\/li>\n<\/ul>\n
First Step<\/strong><\/span><\/p>\nLook at your budget, your business projections, and see what you can afford. If you\u2019re going to approach friends and family for investment, it\u2019s a good idea to create a business plan to show them and to find a solicitor. <\/span>Click here for our resource on creating a business plan.<\/span><\/a><\/p>\n<\/h2>\n2. Outside Investment<\/strong><\/h2>\n![\"email_shareholders\"](\"https:\/\/www.clearbooks.co.uk\/wp-content\/uploads\/2016\/01\/email_shareholders.png\")
<\/a><\/p>\nThere are many types of outside investment (also called equity finance), with some of the most common ones being venture capitalism and angel investing. The way this works is that you sell a part of your company in the form of shares to the investor in return for their money. They then take a share of the profits or losses of your business.<\/p>\n
While venture capitalists tend to be interested in specialised businesses looking to raise between \u00a32 and \u00a35 million, angel investors are often willing to invest in smaller businesses. Similarly, venture capitalists take a much more active role in the direction of the company, while angel investors tend to be more in the back seat.<\/p>\n
Pros<\/strong><\/p>\n\n- You can get large amounts of funding, depending on the investor.<\/li>\n
- You don\u2019t have to rely on a bank or another lending institution.<\/li>\n
- The risks of running your business aren\u2019t all on you, since your investors take on part of any losses.<\/li>\n<\/ul>\n
Cons<\/strong><\/p>\n\n- You won\u2019t have as much control over your business, since you won\u2019t own all of it.<\/li>\n
- Finding investment can be difficult, time consuming, and expensive.<\/li>\n
- You have to have a limited company to sell shares in the UK. (Not a sole tradership or a partnership).<\/li>\n<\/ul>\n
First Step<\/strong><\/span><\/p>\nCreate a business plan to show investors, and start to consider the type of investment you want.<\/p>\n
\n- Visit the British Private Equity and Venture Capital Association to find out more about venture capitalism.<\/a><\/li>\n
- Visit the UK Angel Investment Network to find out more about angel investments.<\/a><\/li>\n<\/ul>\n
3. Loans<\/strong><\/h2>\n![\"blog_payroll-auto-enrolment-saving-piggy\"](\"https:\/\/www.clearbooks.co.uk\/wp-content\/uploads\/2016\/01\/blog_payroll-auto-enrolment-saving-piggy.png\")
<\/a><\/p>\nLoans are fixed sums of money that you get from a lending institution like a bank, or a Community Development Finance Association. You can also get private loans from other people, similarly to the way you would get private investment.<\/p>\n
There are many different types of loans, but they differ primarily in terms of whether they\u2019re secured or unsecured (whether you have to put up collateral to get them) and whether their interest is fixed (meaning that it will stay the same for the duration of the loan) or not.<\/p>\n
Pros<\/strong><\/p>\n\n- You get the money from the loan for a fixed period of time.<\/li>\n
- You retain total control of your business, since you don\u2019t have to sell any shares to get a loan.<\/li>\n
- Loans can help you get your business off the ground \u2014 it\u2019s sometimes easier to get a start-up loan than to try to get investment in a brand new business.<\/li>\n<\/ul>\n
Cons<\/strong><\/p>\n\n- It can be hard to get a loan. Banks aren\u2019t lending nearly as much money in the post-recession years as before.<\/li>\n
- You have to keep up monthly payments, which might be difficult if you don\u2019t have regular business coming in.<\/li>\n
- If your loan is secured with your property (like your house or your car) and you default, you could lose it if you can\u2019t make your payments.<\/li>\n<\/ul>\n
First Step<\/strong><\/span><\/p>\nCreate a financial forecast for your business and determine the amount of money you need for a loan.<\/p>\n
\n- Click here to find more about bank loans for start ups.<\/a><\/li>\n
- Click here to find out more about Community Development Finance Associations.<\/a><\/li>\n<\/ul>\n
4. Crowdfunding<\/strong><\/h2>\n![\"blog_growth-economy-business-money\"](\"https:\/\/www.clearbooks.co.uk\/wp-content\/uploads\/2016\/01\/blog_growth-economy-business-money.png\")
<\/a><\/p>\nCrowdfunding is a relatively new method of funding in which you get lots of people to fund your business instead of just one or a small group. The way it normally works is you set up a crowdfunding campaign on the Internet (such as a Kickstarter), and you get people excited to invest in your business.<\/p>\n
Pros<\/strong><\/p>\n\n- With crowdfunding you can bypass the banks and investors and get funding directly from the people your business is going to benefit.<\/li>\n
- When it works, you can raise money very quickly, and you normally don\u2019t have to pay big upfront fees.<\/li>\n
- Your crowdfunding campaign can pull double duty as a marketing campaign, as it will usually raise the profile of your business.<\/li>\n<\/ul>\n
Cons<\/strong><\/p>\n\n- Crowdfunding success doesn\u2019t just happen on its own, and crowdfunding is not a good fit for every business. You need to have an audience that\u2019s already interested in you before you can start to think about it.<\/li>\n
- You normally don\u2019t get to keep the money you raise if you don\u2019t meet your funding target: it\u2019s all or nothing.<\/li>\n
- Funding a business via crowdfunding isn’t an exact science. What worked for one business might not work for yours, so there\u2019s an element of risk.<\/li>\n<\/ul>\n
First Step<\/strong><\/span><\/p>\nResearch crowdfunding success stories to see is there\u2019s some overlap with your business and those that get funded. Look into different crowdfunding platforms to see which might be a good fit for your business. Ask your audience if they\u2019d even be interested in crowdfunding you.<\/p>\n
Success Story: Clear Books\u00a0Crowdfunding 2013<\/a><\/strong><\/p>\nClear Books has a very successful experience with crowdfunding, raising over \u00a31.5 million in two rounds of investment via our custom-built crowdfunding platform. Founder Tim Fouracre\u2019s best tips for crowdfunding success?<\/p>\n
1. \u201cAlways research and test your target community by asking them if they would be willing to invest. \u00a0Crowdsourcing opinion is a very effective way of testing the waters.\u201d<\/span><\/p>\n2. \u201cAs with any form of fundraising, be crystal clear about why you are raising the money, what you intend to do with it and how your investors might benefit. \u00a0And remember that with crowdfunding, the benefits aren\u2019t always just financial return.\u201d<\/span><\/p>\n3. \u201cTell a compelling story and reach out to your community using all of the marketing and communications tools at your disposal, including email, social media and PR. \u00a0And do this long before you intend to start the crowdfunding \u2013 you need to get people learned and warmed up!\u201d<\/p>\n
<\/h2>\n5. Grants<\/strong><\/h2>\n
<\/a><\/p>\nThis is the most common type of investment for small businesses. After all, it\u2019s the easiest to access since you don\u2019t have to apply to a bank or another source of funding, and there\u2019s no interest or collateral required.<\/p>\n
Friends and family can be another source of investment, but it\u2019s very important to allow for the possibility of failure. No matter what your relationship is like with a person, get a solicitor to help you create an investment agreement. Better to have everything out on the table to begin with than to run into trouble later and ruin a relationship.<\/p>\n
Pros<\/span><\/strong><\/p>\n Cons<\/span><\/strong><\/p>\n First Step<\/strong><\/span><\/p>\n Look at your budget, your business projections, and see what you can afford. If you\u2019re going to approach friends and family for investment, it\u2019s a good idea to create a business plan to show them and to find a solicitor. <\/span>Click here for our resource on creating a business plan.<\/span><\/a><\/p>\n There are many types of outside investment (also called equity finance), with some of the most common ones being venture capitalism and angel investing. The way this works is that you sell a part of your company in the form of shares to the investor in return for their money. They then take a share of the profits or losses of your business.<\/p>\n While venture capitalists tend to be interested in specialised businesses looking to raise between \u00a32 and \u00a35 million, angel investors are often willing to invest in smaller businesses. Similarly, venture capitalists take a much more active role in the direction of the company, while angel investors tend to be more in the back seat.<\/p>\n Pros<\/strong><\/p>\n Cons<\/strong><\/p>\n First Step<\/strong><\/span><\/p>\n Create a business plan to show investors, and start to consider the type of investment you want.<\/p>\n Loans are fixed sums of money that you get from a lending institution like a bank, or a Community Development Finance Association. You can also get private loans from other people, similarly to the way you would get private investment.<\/p>\n There are many different types of loans, but they differ primarily in terms of whether they\u2019re secured or unsecured (whether you have to put up collateral to get them) and whether their interest is fixed (meaning that it will stay the same for the duration of the loan) or not.<\/p>\n Pros<\/strong><\/p>\n Cons<\/strong><\/p>\n First Step<\/strong><\/span><\/p>\n Create a financial forecast for your business and determine the amount of money you need for a loan.<\/p>\n Crowdfunding is a relatively new method of funding in which you get lots of people to fund your business instead of just one or a small group. The way it normally works is you set up a crowdfunding campaign on the Internet (such as a Kickstarter), and you get people excited to invest in your business.<\/p>\n Pros<\/strong><\/p>\n Cons<\/strong><\/p>\n First Step<\/strong><\/span><\/p>\n Research crowdfunding success stories to see is there\u2019s some overlap with your business and those that get funded. Look into different crowdfunding platforms to see which might be a good fit for your business. Ask your audience if they\u2019d even be interested in crowdfunding you.<\/p>\n Success Story: Clear Books\u00a0Crowdfunding 2013<\/a><\/strong><\/p>\n Clear Books has a very successful experience with crowdfunding, raising over \u00a31.5 million in two rounds of investment via our custom-built crowdfunding platform. Founder Tim Fouracre\u2019s best tips for crowdfunding success?<\/p>\n 1. \u201cAlways research and test your target community by asking them if they would be willing to invest. \u00a0Crowdsourcing opinion is a very effective way of testing the waters.\u201d<\/span><\/p>\n 2. \u201cAs with any form of fundraising, be crystal clear about why you are raising the money, what you intend to do with it and how your investors might benefit. \u00a0And remember that with crowdfunding, the benefits aren\u2019t always just financial return.\u201d<\/span><\/p>\n 3. \u201cTell a compelling story and reach out to your community using all of the marketing and communications tools at your disposal, including email, social media and PR. \u00a0And do this long before you intend to start the crowdfunding \u2013 you need to get people learned and warmed up!\u201d<\/p>\n\n
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2. Outside Investment<\/strong><\/h2>\n
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3. Loans<\/strong><\/h2>\n
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4. Crowdfunding<\/strong><\/h2>\n
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5. Grants<\/strong><\/h2>\n