A primer on getting the cash you need to start or develop your business idea:

Every seasoned entrepreneur will tell you that raising money is often their second job, along with having to run their business. Up to selling the business you will need to keep the cash coming in either through cash flow or funding so it is an essential skill

This quick guide outlines the key places to get funds for a European business.

  • Friends and family: This is often the start point for many of us, getting money from your own pocket and those around you that are most likely to support you. This has the benefit of speed and convenience but beware, these types of investors may not be used to losing their money or giving it without strings.
  • The bank manager: Often European businesses are forced to leverage their assets (i.e. their home) as the only way to get significant amounts of funds. This route has the advantage of few strings and you keep your equity but you risk losing everything if your business fails.
  • Government loans and grants: In the UK there are several ways to get government funds in the form of a loan supported by your bank if you don’t have significant assets for securing a normal loan. The best known is the Loan Guarantee Scheme organised through your bank. Again this has the benefits/downsides of a bank loan but is higher cost
    due to extra charges. You should also check out European and UK grants.
  • Angel investors: Across the World there are now well organised groups of wealthy individuals who invest in early stage businesses (or mature ones) in return for an equity stake and they usually invest up to £500K. They fall into different categories from silent investors to those that are highly involved in your business. Getting the right
    Angels is essential as making a bad mistake can be fatal.
  • Convertible loans: offering a convertible loan is a way to get investors to back you by reducing the risk to them by paying them like a normal loan with an option (carrot) to switch the loan into shares at a later date.
  • Factoring/invoice discounting: If you already have sales of a reasonable amount then you can look into improving your cash flows by selling your debtor book and getting a % of the money before your usual terms. Also, if you make large sales to solid blue chip clients you can sell those debts – essentially you are getting a loan but watch out
    for the terms.
  • Customers: one of the best ways to fund your business is by doing a deal with a major client (or all of them) and get them to pay early or fund a new product by offering special terms or giving extra features they require.
  • Venture capital: this is an option for those of us with a huge idea and market potential and usually a more mature business with sales and reference customers. They offer large amounts of funds, usually £1-5M min, and take a significant role and equity stake. Many believe that taking VC money is a last resort due to the complete loss of control
    of the business after receiving funding.
  • Desperation: Many an entrepreneur I have met has told me they have used their credit cards, car loans and other forms of unsecured personal financing designed for other things to get started or bridge a gap -this is usually a desperation measure and is very expensive.

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