Different Options Owners Can Use to Finance their Business in the UK
The number of first-time homebuyers has decreased in UK since 1980. It is not surprising at all, as the millennial generation is more interested in establishing a business or income resource other than purchasing a house. Home ownership increased after 2010 by several points however, it started falling again after 2013. Since 2007, there has been a decline of around 47% in homeownership in UK.
Meanwhile, The Telegraph reported that UK hit the highest number of start-up businesses in 2015. Around 600,000 new businesses launched in 2015 in UK. The options of business financing are also increasing in number and variety alongside the expanding entrepreneurship. Here are some of the options available in the market for safe investment.
Save more, spend less. The concept has changed now. It says that invest more to save more. If you want to start your new business then nothing can beat the benefits of your personal savings. In other options, you start your business based on loans. This means, that you have to repay the loan amount, and you also have to pay the interest in most cases.
The concept of peer-to-peer lending is second safest option for your business. In peer-to-peer lending, a friend, relative, family members, or someone close other than your spouse lends you money. Least amount of interest applies on principal of peer-to-peer lending. However, the chances of losing your relationships are high in peer-to-peer lending.
Private and Commercial Loans
You can get commercial loans from banks or private lenders. Most of the private lenders do not lend high amount of loans for start-up businesses but it is a good catch if you get one. The interest is mostly high in both types of loans.
Venture Capitalism will test your marketing and negotiation skills as you will have to search the market and convince the lenders. In venture capitalism, the individual lender or company enters a contract with you. The borrower is obliged to repay the venture capital once their business establishes after the term period explained in the contract. The rate of interest depends on mutual consent. The venture capitalist may ask you for shares instead of loan repayments, but it is decided before signing the contract.
Home Equity Loan
You can get a loan on the equity of your home to finance your start-up business. However, remember that you may lose your home equity if you suffer a loss at business and fail to repay the loan amount.
Angel investment works like venture capitalism. A lender offers you loan at low interest rate. You establish your business and repay the loan after fixed time.
In crowdfunding, the amount you require is raised by various investors. The investors may ask you for shares or loan repayments. Crowdfunding works like fundraising.
Make sure that the method of financing your business provides you sufficient time to establish your business and earn returns.