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Business Start-up Funding Options

Options for Business Start-up Funding

When it comes to Business Start-up Funding everyone has to do a little heart-searching. There are never any easy options. After all, every funding decision you make will create more decision points down the line and some of them will not be easy. Knowing that, businesses have to take the plunge and ensure there is funding for growth, and sufficient resources to maintain an improving business foundation. So, how do you step into the arena and what are the themes that you should look out for along the way?

Business start-up funding – beyond personal means…

Nearly every business owner has at some time used personal funds to forward their business. In fact, starting from scratch is a pretty tough path. To use your own money, mortgage or another form of funding injection is going to put the pressure on you to perform. Not only that, but often you have to find people to believe in you who have the resources to help. That too puts the pressure on you. So, what route do you go?

Initially, your business start-up funding is going to take you down one of two routes. The first is the ‘internal’ funding route. This route is probably going to involve smaller amounts of money. The second is the more formal approach, where your funding comes from ‘external’ sources. Normally, the latter is more applicable to businesses raising larger amounts of cash. Let’s explore these opportunities.

Internal funding sources

From the outset, internal funding means you need to raise money without going to banks or big investors. Your options are to rely on family, friends, or ‘someone’ you know, as well as your own resources. With this type of funding your initial approach is relatively easy. You will probably feel your approach to friends and family is not as difficult as finding big investors or approaching financial institutions. After all, your approach is easier because you know the people you might ask. Or, at least that is what you think. In fact, sometimes it is quite difficult to ask your friends or family to give you sufficient money. If your enterprise fails you might be ruining relationships that are close to home. So, you need to think about this carefully before you get started.

Less pressure? Not necessarily

Ideally, there is little pressure to achieve aggressive financial targets and performance goals with the internal funding route. So, there is the opportunity of growing the Company using existing resources and at a pace that allows you to get things working properly. On the other hand, the lack of pressures forcing performance can lead to a degree of complacency. This is deadly to a business. The time, and the opportunities slip away and you can miss the one chance you have to getting off the starting line. Worse still, if you are not a ‘self-starter’ you risk the initial investment slipping away while you don’t bring in the money. You must generate income, so you need to retain a strong business focus to generate sufficient cash.

Where business start-up funding comes from your own ‘internal’ resources you often need to impress a wider range of people. Friends or family can be persuaded to contribute on an individual basis. Although, you may have to approach a number of people. Clearly, because of your responsibilities with people you know, you will have to plan carefully. Dealing with a group of low level funders carries its own challenges. Be aware that you may have to spend more time on it than you would with, say, a bank.. However, if you are lucky enough to get one funder your personal responsibility to them can be a burden too. Make sure your relationship can stand it.

What planning do you need to do?

If funding is from family or friends, or ‘someone’ you know ensure you think over these points…

The agreement should be in writing. You need to think about things like…

  • Protect others against losses: The money invested in your business can be lost. Ensure that the loss of the money would not affect their home or standard of living.
    • It should specify the amount involved, any conditions and whether it is for an equity stake in the Company or as a Loan.
    • When and how can money be removed / repaid.
    • What returns on the investment can be expected (e.g. the valuation of loan or shares).
    • Get professional advice for both parties. Remember, personal & business circumstances will change, so keep the arrangements flexible and fully documented.
  • You should consider aspects of your relationship with the people who you approach to invest.
    • For example, Divorce, when assets need to be divided you may find your own resources diminished suddenly.
    • What would happen if you approach an older person? Have they got sufficient resources to cover themselves if the business fails and you cannot pay them back? They need to be aware of, and in control of their personal finances. Lending money can have serious consequences if they are suddenly left without enough to survive.
    • Think about health too. If your friend or family member lends you money, what if they die suddenly, are you involved with a will? Is there sufficient money to pay your loan back if the will demands particular amounts to go to benefactors. Are you even in the will?
    • Life often throws curve balls. Your lender may be a family member or a friend, but what happens if they lose confidence in you or suddenly need the money themselves, how is that going to affect you, them, your relationship and the business?
  • Keep the Friends & family involved, both in the good and the difficult times. No-one likes surprises, because too often the surprise is bad news. This is especially the case where health and continuity of the business depends on good will of your friends and family.
  • Exit arrangements – ensure you document the exit route. This applies to you and to your lender. This readiness sets the level of expectations in your new relationship. It also helps you reassure your lender. Afterall, they need plus points in this arrangement too.


The complexities of setting up the sort of arrangements needed to fund your business may make the ‘internal’ route too risky for you or your family and friends. So, you need to look at the balance of business risk that may affect your business commitment. You cannot just walk away from it if you have close friends/family who rely on your business judgement and some sort of pay-back. So, there is quite a difficult range of considerations you need to be aware of and to prepare contingencies against. Not only that, but these considerations are outside of any business decisions you should consider.

It is not the ‘easy’ route

If you are going to take the ‘internal’ route, get advice. Develop a support plan for yourself. Then you will have contingency cover, alternative funding, flexibility and other people who can help you.  Never borrow too much from people close to you. Consider the feelings of those who lend you money too. Then, on top of that, think about how to grow your business as well.

In the end, going the internal route is not the easy route. Both internal and external business start-up funding have benefits and difficulties. Consequently, you need to ensure you are aware of everything that is in the balance. Finally, to be successful in your new enterprise you need have plans to ensure you can maintain that balance. Afterall, your future depends on it.

An investment in knowledge pays the best interest.
~ Benjamin Franklin

Business Start-Up Funding is dependent on attracting investment. Ensure you present the facts and support them effectively.
Business Start-Up Funding is dependent on attracting investment. Ensure you present the facts and support them effectively.

Taking the external route to business start-up funding

Business start-up funding where you need larger amounts of money to get going requires more organisation and professionalism. There is no doubt that the ‘external’ route is a more formal approach. However, the larger sum of money will take you out of the personal funding arena. Although, many successful businesses have taken loans from banks and investors as well as securing some funding from their own reserves, family and friends.

In general, if your project is going to be more substantial you will need larger sums. This will mean you must work in the more challenging environment of loans and investments. So, what do you need to think about and to know in advance for this ‘external’ route?

Dragon’s Den – the world of big investors

The “Dragon’s Den” has promoted one, rather gladiatorial approach to fund raising. Generally, to be successful pitching to big investors you need to be well prepared. While it is an opportunity to sell your concept, you cannot just be good at marketing. Be clear on, what you are looking for (e.g. money or money & expertise) and what you are offering (your product or service). However, there is more to it than that. Let’s look at some of the things you need to think about.

Twelve skills you need to be an entrepreneur

If you are to pitch to investors you can be sure they have done everything they needed to be rich enough to be an investor. Up front, for them, will be the value they place on their own experience. The university of hard knocks is where most entrepreneurs learned their trade. Each of those knocks taught them what they need to succeed. Consequently, if you want to pitch to them, you need to know what they expect of you. Here are 12 skills that you should cultivate if you want to succeed in the ‘external’ funding arena…

1. Opportunist:

Successful entrepreneurs look for ideas to exploit and discover new problems. They are great opportunists. They look at business as a multi-level structure, revealing both niche opportunities and ones with wider scope. You will need to be able to prove that you have identified a great opportunity. But also, you need to persuade them there are further opportunities down the line for this business. If they mention an idea for improvement, go with it, think on it. They may see what you have not. Opportunism requires curiosity, research, flexibility, and the ability to see potential for development. You have to show your investors you have that mind-set.

2. Passionate:

No businessman will get a loan or be able to bring on board other investors or partners without passion. You have to foster excitement, clarity, potential, commitment and knowledge in your pitch and in your business. The degree to which you can do this is the degree to which you will show your leadership potential. Get passionate, get knowledgeable, get right in there. You will lose your pitch if you drop a clanger and mess up a simple fact, or do not have the right facts to hand. Someone who is passionate knows volumes about their potential business and you have to project that to your investors.

3. Motivation and Time Management:

These two skills are so closely matched that they are almost inseparable. Prioritise from the start. Your planning, milestones, processes, performance, goals and consistency all depend on it. You will have no business progress or growth without a solid track record and motivation to follow through. Further, you will destroy your motivation if you cannot get things done on time, prevaricate and lose focus. Be ready to show your investors you have the required motivation and time management by demonstrating previous successes – even in a different business.

4. Self-Developer:

Every entrepreneur is an inveterate self-developer. Learn many things every day. Make sure you can impress your investors with your knowledge. Read about your subject, but related subjects too. You must be ready to lead, and the scope of your knowledge must impress your staff as well as your investors. Learn, learn and do more learning. Investors WILL know things about your business. They will expect you to know more and be prepared to discuss it. Consequently, be armed with the facts, and know why they are relevant and the implications each fact has for the business.

5. Problem solver:

You will be expected to confront and overcome problems in your business. That means teamwork, skill development, research skills, lateral thinking and analytical skills. This is essential to being successful, but, more to the point, it is a crucial survival skill in growing your business. Saying you can solve problems is not good enough. Demonstrate how you have done that with your business and you will catch the investors eye.

6. Strategic thinking:

Successful business people do not just tackle one problem and move on to the next. They place every issue, problem and opportunity in a context. While solving one problem, they must be able to stand back and look at the wider picture. They must use strategy to focus on the longer-term view and their direction of travel. If they can successfully retain the strategic view, they will find it easier to solve the immediate problem, but they will also see the next one earlier.

7. Frugal, with an eye to the bottom line

No investor ever gave an extravagant business start-up the funding they needed. Focus on your profits, reveal opportunities for growth, keep the costs down. You will find creative solutions to your problems much better if you define your success criteria within well-defined financial and practical limits. More businesses have failed because of the money they throw at problems, than those who set themselves frugal goals. Prove to your investors you value the money and can spend it appropriately. Show that you can handle resources properly and that you can carefully assess your investments and opportunities.

8. Organisation and Efficiency

No business person was efficient without being organised. Have the background facts and figures in your head, or know where they can be found. If you cannot perform efficiently, your investors will fear that their money will haemorrhage from the business. Prove you can be quick, organised, focussed and effective in efficiently delivering your targets. Use your self development skills to learn the efficient methods and how to measure them.

9. Resilience

You will get knock-backs, let-downs, failures, rejections and barriers. Handling these, the resulting stress they create, and sometimes slow progress, will show your resilience. Show your investors determination, motivation and courage in the face of adversity. They will have been there. They will be looking for it.

10. Communication:

Say it with passion, precision and knowledge, but do so with brevity and clarity. Good communication is a lifelong development skill. Focus much of your learning time on it. Learn how to present yourself and your facts efficiently, and with grace and character. Then you will be on the road to being a communicator. Then you will impress your investors.

11. Networking:

Find out who is the best in your business area. Seek them out. Make them your friend. There is no better route to investors and business success than surrounding yourself with positive, successful and charismatic people. Learn the ways of those whose position you aspire to displace. Find ways to ensure that you can learn about them and from them. Keep doing your networking, keep focussing on success. As your network grows, so will your opportunities for deals, contracts, partnerships and collaborations. Be with the people who know and soon you will too.

12. Sales and Marketing:

Know the difference. When you sell, you convince your customer they want your product or service. The unique selling points fit the needs of the customer. When you are marketing something you are setting the parameters of the product or service that the customer will feel comfortable within. Sell to your investors. You should know the facts they need and present them with what they want to hear. But do it in the right clothes, with the right angle of presentation. No investor is going to give away business start-up funding to someone who has a new line in perfume to an unshaven man in denim jeans and dirt under his fingernails.

Investors are Customers

Whether we are in front of a bank manager, or an investor ‘Dragon’ you have to treat them right. That means having the right information, the right knowledge and the right presentation. Further, you need the right skills and experience to deliver that what you are offering. Consequently, you need to think carefully about your presentation. After all, your bankers and investors are a type of customer. You have to sell to them and market your business so they are convinced. Here are some presentation points to consider…

  • Use external independent support for your assumptions and present supported facts.
  • Think very carefully about the advantages and disadvantages of Debt or Equity Funding. With Equity funding is easy to give shares but difficult to reclaim them.
  • Ensure to document in a Shareholder Agreement, how shares will be valued and traded in the event of a share sale.
  • Provide simple but effective facts clearly – especially about finance.
  • Have a clear, and well documented financial strategy.
  • Make sure you can back-up any claims you make about your product or service.
  • Be mega-enthusiastic, polite and accommodating.
  • Show them who you are.
  • Be prepared to fail – the winner will have presented many times before winning!

Lastly, remember it is easier to raise money for an existing business, than for a concept.

CHARTER4 is a route to establishing and improving your business

CHARTER4 is not able to provide funding. However, many of the ideas in this article are based on sound business principles and business improvement. If you are reading articles like this one, then we are sure that one day your business will want to raise its standards. CHARTER4 is a business based on standards. We focus on helping our clients to improve their business through meeting the international standards that are becoming increasingly important in the global business village. If you think your business is ready for the challenge and rewards of the established, quality management standards. then we can help.

We are specialists in ISO 9001 – the quality management standard. But we are also able to deliver skilled consultancy and support in a whole range of ISO Standards that will increase the potential of your business, please your customers and make your business a better prospect for investment. However, best of all, we don’t just help you tick the boxes. At CHARTER4 we ensure that certification to ISO Standards is integrated into your business. We aim to improve your business, rather than just comply.

We can help your business become a better prospect for investment. If you would like to know more, please click one of the buttons below. We look forward to supporting your success.

Certification with Charter 4 – the Business Benefits
  • Improve, rather than just comply.
  • Full service and ongoing support to compliment your resources.
  • Build on your Processes & Systems (no standard templates).
  • Help defining your Best Practice.
  • Certification by independent UKAS accredited Assessors.
  • 100% Success & guaranteed support until Certification.
  • Help to get Government Grant (when available).
  • Flexible support to complement your resources.
CHARTER4 – Partners you with the experience and insight to help you grow using management Standards. We will help you improve your business, rather than just comply with the Standards.
Charter4 - We partner with you to help you grow using management Standards. [Article Name: The Biggest Mistakes with ISO 9001]