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Start-Up Business Finance

Start Up Business Finance

Thinking of setting-up a new business? But wondering how you will finance such a venture? This article will look at the different options for start-up business finance. Depending on the nature of the business, getting started can be costly, and is a limiting factor for many entrepreneurs. However, there are options for financing all types of new business. Of course, the information below is a great starting point for information however, contacting an expert commercial finance broker should be high on your to do list. 

Financing A New Business

A few lucky individuals manage to set up a new business with little investment, it grows over-time, and becomes hugely successful almost by mistake! For the vast majority if you want to build a successful business you will need a comprehensive plan, initial investment, and ongoing hard work. Without this, your new business will likely become a statistic, over 60% of start-up businesses fail within the first three years. Choosing the right start-up finance is taking the first step toward building a successful business. Some of the options include:

  • Self-investment 
  • Loan
  • Asset finance 
  • Invoice finance 
  • Grant
  • Investors 

Self-Funding a New Business

To retain complete control of your business you may wish to self-fund. Injecting initial cash resources yourself, avoids any need for commercial finance, and means that you are not answerable to anyone else. Depending on your individual situation, the amount required, and nature of business this may or may not be practicable. For many people, they do not have large sums of money to self-fund a start-up, and business finance is required. 

Start-Up Business Loan

A loan is the most common type of commercial finance. A loan can be used to inject cash-flow into a business and can be used for a wide variety of purposes including purchasing equipment, raw materials, staffing costs, premises and more. However, securing a business loan as a start-up may not be that easy. Lenders need to ensure that they are lending appropriately, and that they are likely to get their money back. Therefore, particularly from mainstream lenders, you may find it difficult to secure a loan for a new business. 

A commercial finance broker, such as MC Commercial Finance, can help you to secure a business loan for your start-up. You will need a business plan, evidence of income and expenditure to date, alongside comprehensive profit and loss forecasts for the coming years. A broker can help advise whether a loan will be feasible, and also have a wide range of knowledge of the market and which lender is most likely to offer a loan and meet your requirements. 

Asset Finance 

If your start-up business requires the use of equipment, asset finance may be a viable source of funding. Asset finance is a specific type of business finance that allows you to purchase equipment and/or vehicles that are vital to your business. From PC’s to HGV’s, manufacturing equipment to tools, asset finance can help you to secure the essentials to get your business started. 

Asset finance is a loan secured against the equipment being purchased. Depending on the type of asset finance you may be leasing the equipment or will eventually own it. Importantly, although you will need to pass credit checks, this type of finance is secured against the equipment meaning that if you default it can be repossessed. This is less secure for the future of your business if the equipment is essential to operations, but more secure for the lender making it an easier type of finance to organise. 

Invoice Finance for Start-Ups

Invoice Finance can be an invaluable tool for new businesses, so much so that we covered it in more depth in another article that you can find here.  One of the biggest reasons for the failure of a new business is lack of cash flow, invoice finance can help to maintain a stable cashflow, and to help the business take on larger projects, therefore, pushing growth. An experienced commercial finance broker can help you to secure the most appropriate invoice finance for your requirements. 

Business Start-Up Grant

Depending on the nature of your business and the industry that you will be operating in you may find that there are grants available to help you get started. There are government backed grants, as well as some local authorities offering grants, and industry specific or charitable organisations. A grant is a good option as it doesn’t need to be repaid, however, the criteria is often very strict, and the application process time-consuming and difficult. Competition to secure a grant is also usually intense. You can start by checking the government website for grants, however, you may prefer not to rely on the option of a grant to get your business up and running. 

Business Investor 

In 2022 there are numerous options for gaining outside investment into a business. You can directly sell a portion of the business to another party utilising their investment, as well as any expertise that they bring with them to grow and develop. Venture Capital firms may be interested in buying a share of the business. However, you should be aware that selling a portion of your business to raise funds involves relinquishing full control over its future direction.

Crowd funding has become an increasingly popular option. Dedicated crowd funding platforms allow individuals to invest small amounts of money into a business or idea with the promise of some type of return, not necessarily equity, if it becomes a success. This type of finance is often used for product development, and if it becomes available the investors get early access at reduced cost, depending on their level of investment. 

Commercial Finance for Start-Ups

As you can see there are many different finance options for new businesses. Which is right for you and your company is dependent on many factors. Choosing a commercial finance broker that you can trust is the first step to a positive and beneficial relationship with business finance. Book an appointment with MC Commercial Finance, to get support and advice with choosing the right type of finance for your requirements, as well help to identify the correct lender for your needs, support through the application process and beyond. 

MC Commercial Finance Ltd is authorised and regulated by the Financial Conduct Authority 
(Reg number 948719).
MC Commercial Finance Ltd is an independent credit broker not a lender.
Company Registered Number: 12472873