5 funding and finance tips for start-ups and entrepreneurs in the UK.
Running a business isn’t easy, and starting one up for the first time can be hard work. So we have put together 5 finance and funding tips for start-ups, sole traders and self-employed people.
Bank Accounts
Some people can be surprised at first at how different business banking is compared to traditional personal banking.
First of all – generally speaking it isn’t free! Most business bank account providers will provide an initial period of free banking, but after that you will usually have to pay a monthly fee of between £5 to £15, and also pay other costs such as transaction fees on all the incoming and outgoing payments to your bank account.
So finding the right bank account is important for businesses. If you are running a Limited Company in the UK it is also actually a legal requirement to get a business bank account.
A great place to start is Martin Lewis MSE’s page on business bank accounts here, which sets out a selection of the deals available.
Angel Investment
We have all seen Dragons’ Den, so it is fair to say that to some degree the concept of angel investment is a fairly widely understood one.
Is it right for you and your business? That will of course depend on a lot of factors.
If you can start up quickly and efficiently on relatively low capital, and can make a strong step forward into a business you have experience in, then you may not need angel investment.
On the flip-side – if you don’t have enough capital to get started, and think that you may be able to find an investor to take your business to a level that you might not have been able to achieve otherwise, then it could well be something to consider.
It is of course a big decision, and one that should be taken carefully.
Grants and Government Funding
Grants can be hard to get, require a lot of paperwork, planning and documentation.
However grants and government funding can provide a big boost if you can actually get the funding.
Personally, I would say not to spend too long chasing government grants – many people have dwindled away time on this, that could have been far better spent on the business itself or on other sources of income. I have also seen grants that insist on spending the money on ‘market research’ and similar, which again, is not necessarily the best use of your time.
Loans
Getting funding for your business isn’t easy, and many other sources of funding (eg grants) will want to see alternative funding sources, such as a loan.
There are a variety of factors that can hold back some loan applications, such as bad credit, negative equity, mortgage arrears, or even the fact that the business owner is self-employed – which can be considered a risk by some lenders.
This doesn’t necessarily mean that getting a loan is impossible. One provider in the UK called Evolution Money provide loans to self-employed people and entrepreneurs.
Like any form of lending, you aren’t guaranteed to get a loan, and always read all the details and think carefully before applying for credit.
Accountant vs Online Tools
Some people will find themselves tempted to save money and cut costs wherever possible when starting up a business.
Is getting an accountant really necessary? It is a business expense I can afford at this stage?
Getting an accountant can save you time, money and resources – and can help you avoid a variety of business, tax and legal issues that could arise in the future if you don’t get an accountant and go awry of any laws or best practice.
However getting an accountant may not necessarily be possible for everyone, eg businesses running on very low costs, or those with little to no start-up capital.
One alternative that may be worth considering is the use of online accountancy tools or services, we have put together a separate article on this that you can read here.
