Welsh Government

5 ways that you can finance your business

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When it comes to starting or maintaining a business there are many questions that often hang over your head, where to locate? how do we market this? The list is endless. However, without a doubt one of the biggest and most important queries is wondering just how you might finance it.

Sound familiar? Well don’t fret, we’ve got you covered as we take you step by step through five ways in which you can gather the vital funds required to make yourself a success.

 

Bank Loans

A loan is an amount of money borrowed for a set period within an agreed repayment schedule. The repayment amount will depend upon the size and duration of the loan and the rate of interest. Banks usually charge interest on any loans that you get, but the terms and price will vary between providers.

Most lenders will require you to share the financial risk by providing capital to demonstrate your commitment and provide a contingency for repayment if things go wrong as well as have a comprehensive business plan and cashflow forecast for larger borrowing requests. A good credit score is vital for this particular branch of lending.

For more information click here.

 

Start-Up Loans

The Start Up Loans Company is a UK-wide, government-backed scheme, which offers a repayable loan to individuals over the age of 18 who have a viable business idea but no access to finance. The scheme funds businesses in every sector. As well as financial backing all loan recipients are given access to a mentor, free training events and exclusive business offers.

Individuals wanting to start up a business can access borrowing, in the first 2 years of trading, at 6.2% APR. Loans can be between £500 and £25,000 with a repayment term of 1 to 5 years. Applicants can make an application for a Start Up Loan free of charge and will never be charged a fee for making this application or be asked for a deposit.

For more information click here.

 

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Business Angels

Business angels invest in businesses in exchange for a share of the business’ equity. Most business angels invest between £10,000 and £750,000.

These investors usually invest in start-ups or young businesses that need to fund activities like product development or market expansion. They can make investment decisions quickly but will still need to see that you have a good business plan before they commit.

They may take an active role in your business and can be a useful source of knowledge, mentoring and contacts.

For more information click here.

 

Development Bank of Wales

The Development Bank of Wales is a unique lender to businesses in Wales. It has been set up by the Welsh Government to support the economy of Wales by making it easier for businesses to get the finance they need to start up, strengthen and grow.

Currently the Development Bank of Wales has a new streamlined 2-day fast track scheme for micro loans between £1,000 and £10,000 for Welsh businesses that have been trading for more than 2 years. Generally, repayment terms range from 1 to 10 years. Interest rates charged are based on a business’ individual circumstances and are fixed for the term of the loan.

For more information click here.

 

Equity Finance

Equity finance is a way of raising finance from external investors in return for selling a share of your business. The main providers of equity finance are friends and family, business angels and venture capitalists.

Unlike debt providers, equity investors do not have rights to interest or have to have their capital returned by a particular date.  Equity investors are long term investors who earn a return on their investment through dividends and capital growth.  They would usually expect a higher return than debt investors because the risk involved is greater.

Your business may be suitable for equity finance if it has:

  • fast growth potential and a clear growth strategy
  • an innovative product or service
  • a strong management team
  • strong intellectual property
  • a clear and achievable exit strategy
  • Equity finance is available from different sources including finance Wales, business angels, venture capital funds, family and friends and crowdfunding.  

For more information click here.

 

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