7 ways to get startup funding for your business

So, you've got your big business idea and you know it's going to bring in the big bucks. But how do you raise the capital necessary to start your business?

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Are you so confident in your new business venture that you're convinced you'll become a millionaire? That's a good start.

While we have every confidence in your exciting new quest, it's common for new businesses to fail at the first hurdle: getting startup funding.

Starting a business as a student requires a lot of hard work and commitment. And perhaps most important of all, it requires getting your hands on some money to make your entrepreneurial dream a reality. If you're wondering how to raise capital for a startup, here are some ideas to get you started.

How to get startup funding

Here are some ideas on how to raise money for a business:

1. Ask friends and family

   For a lot of young entrepreneurs, the first investors to take an interest in their big ideas will be their parents, family and close friends.

   If your friends and family have a small stake, they'll be more inclined to offer invaluable (and honest) feedback on your business or product, and may even promote it through word of mouth.

   It's a good idea to make this your first port of call when you start a business. If you find there's someone in your life with a secret stash of cash they're willing to invest in your business, you may not need any other startup funding.

   Remember to treat any friends and family who invest with professionalism and respect. Remember this isn't free cash! Keep your investors up to date on how their money is being spent and offer them regular updates on how the business is progressing.

2. Try crowdfunding

   Crowdfunding for new business ideas is a popular approach (you could even crowdfund your degree!). It can be an effective way to make cash – provided you have an interesting idea that captures public interest.

   A couple of the most well-known crowdfunding websites for startups are Kickstarter and Crowdcube. Bear in mind these sites charge a fee of around 5% of what you raise (plus an additional fee for processing your payment), but these fees are usually only deducted if you reach your funding target. Check the fees before choosing a crowdfunding platform.

   The potential to raise capital here is huge, and some of the biggest success stories in the UK startup scene began on crowdfunding sites.

   However, you might be better off looking to raise a smaller amount of seed capital and giving away a bit more equity as the risk for potential investors is high.

   To boost your chances of crowdfunding, make sure you have a solid profile on these websites. After all, this is all your potential investors will be judging your business on, so make it shine.

3. Approach angel investors

   Angel investors are essentially people with a lot of cash (normally very successful business people themselves) who want to invest in the next big idea. Think Dragons' Den, but without the sneering and shady comments.

   Best of all, angel investors are about more than just a decent slab of cash to help with your business. They'll even mentor you throughout your adventure, offering advice when you need it and warning you against common mistakes they've seen being made time and again by small businesses.

   How to get the attention of angel investors is another matter altogether. A quick Google should throw up some ways of getting in touch with investors, but the UK Business Angels Association website is a good place to start.

   Look out for any pitching events and conferences where investors are likely to be and enquire about pitching your product. Don't forget smaller events can be just as effective as the bigger ones – and you should never have to pay to pitch.

4. Try the government's startup loan scheme

   

   Perhaps the quickest and most straightforward way to find startup funding is through the government-backed startup loans scheme.

   The scheme is aimed at young entrepreneurs, offering loans of between £500 and £25,000 to get a business venture up and running. If you're serious about raising capital for your business, this is something to look into.

   Some students have benefited from government loan schemes for their businesses while still studying for their degrees – including two students who launched a reusable sanitary pad business.

   You would be expected to repay the loan at a rate of 6% per year over a maximum of five years.

   You can also get free support and guidance when writing your business plan and mentoring for up to a year.

5. Look into university schemes and competitions

   Believe it or not, even your university could be interested in investing in your idea. They'll often have cash set aside for budding entrepreneurs like you.

   Universities are usually keen to nurture the entrepreneurial spirit in their students, and if your business is a success, it's great PR for them too.

   Try searching online for any young business competitions or funds associated with your university. You can also contact the uni careers department as they'll be able to point you in the right direction.

6. Fund it yourself

   Easier said than done, right? But if you're serious about getting your business up and running, try to put aside some cash to help fund it if you can.

   It could help to set up a savings account with the sole financial goal of backing your business idea. You could deposit any spare cash that comes your way into this account and leave it to gain interest.

7. Ask for a bank loan

   We've pushed this one to the bottom as it can be hard to get accepted for a bank loan as a young person, making the above options more realistic if you're still at uni.

   Being accepted for a loan would rely on you having a good credit rating and an extremely solid business plan. That way, the bank can be confident you'll be able to pay them back when the time comes.

   That said, if you start working on your business plan and perfect your credit score, a business bank loan could be within your reach.

If you don't need thousands upon thousands to get your business started, check out our guide to making money quickly – it could do the trick.