The right financing gives your business project the best chance for success. First-time entrepreneurs find it challenging to get funding for their business projects. Without showing some traction, investors will not invest. When it comes to business and financing, there are numerous ways to fund your projects.
Here are three.
1. Find an Angel Investor
According to the UK Business Angels Association, there are over 15,000 angel investors, crowdfunding platforms, and accelerators in the UK. In general, angel investors in the UK invest between £5,000 and £500,000 in a single business project.
In the earliest moments of your business, you will likely find yourself light on funds for investment. As such, you may be asking yourself, how do I find an angel investor? The best way to find the right angel investor is through your network. Chances are you know other investors in your industry, or you know someone who can introduce you to active investors in your industry.
The vast majority of angel investors choose to remain anonymous. Generally, the majority of deals come through their own networks. angel investors are already inundated with opportunities. As such, they are not open to being approached. The good news is, through your network, you can find them and get an introduction.
Once you identify the right angel investor(s), prepare your pitch and vision to win them over. When it comes to pitching investors, creating an excellent pitch deck is challenging. To ensure your pitch deck is successful, follow the 10/20/30 rule.
Here is a breakdown of the rule:
- 10 – Amount of slides you need for your pitch deck
- 20 – Amount of minutes your pitch should last
- 30 – Font size for your pitch deck
With these rules in mind, you should create a winning pitch deck.
2. Save 30% Of Your Monthly Income
If you want your business to keep running, you’ve got to put some money into it. Generally, you need to put 50%. Reinvesting half of your business income back into the business will ensure its growth and expansion. If you want to fund your business project, we recommend saving 30% of your monthly income. How do you achieve this? By following the 50/30/20 rule.
This rule allows you to allocate your money according to three categories:
- Needs
- Wants
- Financial goals
Popularized by Elizabeth Warren, this rule is easy to customize based on your personal circumstances. Since you want to start your business project, allocate 30% of your monthly income to your financial goals.
Allocate fifty per cent of your monthly income to needs such as rent, groceries, and utilities. In our case, thirty per cent of your monthly income should go towards your financial goals. Twenty per cent should go towards things such as vacations, dining out, hobbies and others.
To save 30% of your monthly income, follow these steps:
- Calculate your monthly income – add up how much you receive each month
- Calculate a spending threshold – multiply your monthly income by 0.50 for needs, 0.30 for financial goals and 0.20 for wants
- List and tally your monthly expenses under these categories
Track your expenses each month and make changes if needed. Stick to your spending threshold to achieve your financial goals.
3. Borrow the Money
There are different ways of borrowing money. The most common is borrowing money from family and friends. However, it is usually a terrible idea. First and foremost, it puts a strain on your relationship. This leads to a loss of trust and resentment. To avoid this, follow these steps.
If borrowing money from family and friends, prepare a short presentation. It should outline why you need the money. Include details on how you will use the money, how much interest you’ll pay in return and how long it will take you to repay the loan.
Set clear repayment terms. Avoid general statements such as “I’ll pay you when I can.” This shows that repaying the loan is not a priority for you. You should have a backup plan just in case you fall behind in your payments. In the terms, include a late fee and it should increase over time.
All the details discussed above and more should be written down. Put the agreement on paper, and both sign before you, the borrower, receives the money. Make sure both parties have a copy of the agreement.
If this doesn’t work for you, you can always borrow money online from a reputable lender and fund your business ideas without risking your relationship with your family and friends.
Finances: 6 Responsible Money Borrowing Tips
Final Thoughts
When companies reach a point in their life cycle, they need funds to grow and expand. In most cases, the business needs thousands of pounds or hundreds of thousands of pounds to enter new markets, add new products or expand sales.
There are tons of ways to raise money to fund your business projects. But the ones outlined above are the easiest and most effective. If your business projects are worth it, it should not be too hard to raise funds.
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