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How to Raise Enough Capital to Set Up a Small Business

Business

How to Raise Enough Capital to Set Up a Small Business

You have to speculate to accumulate, as the old adage goes, and this is never truer than in the world of business. Before it can ever make money, setting up a business costs money.

There are so many things that you need to pay for. Premises have to be found, and a deposit, bond, and the first months’ rent paid upfront. The office or production space you choose then needs to be outfitted with equipment: computers, printers, scanners, fax machines, and telephones, or else machinery that can cost tens of thousands of pounds. In addition, you need staff to work for you, and enough money to cover their initial wages at least.

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Unfortunately, very few of us have the money to absorb these costs at our disposal. We have to turn to borrowing options to fund us, and luckily there are an awful lot of them available.

However, this choice, in itself, creates something of a dilemma. Finding the right solution takes time and research, and it’s something that you simply can’t afford to get wrong. Fortuitously for you, we decided to outline a few of your options to give you some food for thought…

Business Overdrafts

Even before you set up a business, some banks will be willing to offer you a business overdraft. At first, this is likely to be very small – no bigger than an ordinary overdraft – but the capital it will give you access to might provide just enough of a boost to your total to get you started. The downside is that credit checks will be stringent, and anyone with a suspect credit history will probably be limited in terms of how much they can borrow, or whether they can borrow at all.

Business Loans

For those who don’t have the option of dipping into an overdraft facility, business loans can offer a useful starting point. There are two main types to consider: secured and unsecured loans.

Unsecured loans are most people’s preference, as they’re not levied against any assets. The price that you pay for this reduced risk, however, is higher interest rates, more stringent credit checks, and less favourable repayment terms.

Secured loans, on the other hand, are levied against an asset: your business, your home, or perhaps your car. They offer far more favourable terms than their unsecured counterparts, and access to larger sums of money, yet a failure to meet repayments can have grievous consequences.

Pawnbrokers

A less commonly explored option is borrowing from a pawnbroker. Like secured loan lenders, they balance their risks by lending money against an asset belonging to you. However, you have far more of a say over what this item is. The interest rates offered by pawnbrokers tend to be competitive, and credit checks are non-existent. This makes them very easy to access, and a highly attractive option for those who don’t need an overly large sum of money.

Could one of these borrowing options be the ideal solution for you?

I am the founder of Startup Today. I am the main writer and have put in many hours of work into creating this blog. If you want to find out more about me then lets get in contact.

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