startup funds

How to find investments in startups ?

Linkilaw Startup Advice & Tips

Now that you have a concept in place for your business, and hopefully a game plan, you’ll want to determine how much money it will take to launch. Before you look for funding sources, you will need to have a business plan and a budget in mind. Without those basics, you can’t possibly convince anyone else to invest in your company or loan you the money to get it off the ground.

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Luckily, if you’re not prepared to front the necessary funds for this business on your own (or bring in capital partners), there are a few ways to get investments in startups. Some will mean paying interest, others will involve giving up equity – and others may require both in order to bring in just the right investor. Now, it’s time to get together your numbers, vision, facts and figures, and prepare to do battle.

Polish Your Armour

Even applying for a loan in this competitive market isn’t a slam dunk these days. Creating a comprehensive business plan will not only sway those you need toward your ideas, it will also be a helpful guideline to keep you on the straight and narrow. Remember to update your plan every few months – the ability to adapt to changes in the market is an essential component to long-term success.

Practice pitching your company in front of friends or associates. Have them fire questions at you, challenging your expertise and background. Think through any alternative plans you might utilise if sales should take a downturn. How would you find new customers, or make the lease payment? Those who would back you will want to know what you’re made of, so equip yourself for combat.

Choose Your Game Piece

The King (Bank Loans) If the business is brand new, it’s going to be considered high-risk – by pretty much everyone. That’s okay. No risk, no reward. If your credit is good, and your business plan looks impressive it’s going to increase your choices. For instance, banks love to loan money to people who don’t need it.

[tweet_dis]Think about keeping your savings in place and financing the company funds you need. The interest and fees are deductible expenses against your gross revenues, so for all intents and purposes, you’re using ‘other people’s money’ at no cost. [/tweet_dis]The best thing about getting your own loan is that you aren’t giving up equity to outside investors, nor are you relinquishing authority or control over your operations.

The Queen (Government-Backed Funds) – From research and development grants in Scotland, to apprenticeship training programmes in Northern Ireland, there are dozens of available grants and schemes supported by the UK government.

These sources are certainly advantageous, if you need the support. On the downside – when there are regulations and compliances on top of loan payments – it can be a bit intimidating. After all, government-backed money loans never go away, and are not dischargeable with insolvency.

The Rook (Equity Investments in startups)

You may realise there is an ever-growing community of accelerators and incubators, providing startups with everything from mentoring to equity partnerships. What you may not know, is that they may very well be earning tax credits as well.

In exchange for investing in new companies (a win-win for all), the UK devised a series of tax reliefs in 1994 – known as the EIS (Enterprise Investment Scheme) to replace its Business Expansion Scheme. The EIS Association (EISA) is the official trade body which works to aid the provision of capital to SMEs in the UK. When an investor subscribes for shares in small unquoted companies, the EIS gives them relief on both their income and capital gains taxes – a ‘pay it forward’ programme for taking higher risks with innovative startups.

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Keep your wits about you – these investors will come armed with their own breach of contract solicitors in tow, so be sure that you fully comprehend your part in the deal and are able to meet the obligations.

The Bishop (Credit Cards) – Well, there’s ups and downs to this choice. For one, you should obtain a card in the business name (to build its credit standing), even if you are personally liable for the charges. This route isn’t the best if you need large amounts of money – obviously the interest rates are excessive (though their introductory rates may be little-to-none for a given time frame).

Again, the time to hit your credit cards is when you don’t need to, because you have savings in place and a healthy cash flow.  They are one of the fastest ways to build your credit score; so, charging and paying off each month is a good game plan.

The Pawns (Crowdfunding Rounds)

[tweet_dis]If your business idea elicits excitement from a wide range of people, you may just be the perfect candidate for crowdfunding.[/tweet_dis] If you can convince a few heavy hitters to jump in, it will help to give your credibility a boost and get the party started – so to speak.

Seek advice on where to set your funding target; it should be high enough, yet not a number you don’t stand to achieve. If you ask for too little, people will think you really don’t need their contribution. Make sure all monies pledged in the round are received and forms are sent along to Companies House, in order to be properly closed. Keep in mind that your crowd of new investors will be watching you to make sure you work diligently.