Northern England is quickly becoming one of the UK’s most bustling start-up communities, particularly due to strong business growth in the Newcastle area. In this region, there are thousands of start-ups vying for top spots in their respective markets. Of course, with all of that economic and corporate activity happening, you know there must be a great deal of financing happening behind the scenes. Indeed, North-East start-ups have access to a wide variety of funding and support options and opportunities. More specifically, here are eight distinct approaches you can take to fund your North-East start-up:
1. Use a Seed Enterprise Investment Scheme (SEIS)
The government provides several venture capital programs that give investors incentives to lend UK bushiness funds or buy shares in British companies. The two most commonly used options are the Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS), the latter of which is ideal for start-ups.
In order to qualify for a standard EIS, your company would need to have existed for less than seven years (from the date of its first commercial sale), have less than 250 employees, and less than £15 million in gross assets. For example, Seb Newlove, who recently completed a round of funding under the EIS scheme for his start-up, claims that the EIS scheme was an integral part of the reason that they were able to raise funds – “the tax breaks afforded by the EIS, or SEIS, scheme are very attractive to angel investors and a great incentive for them to invest in early stage companies“.
If, on the other hand, your company is less than two years old, has no more than £200,000 in gross assets, and has fewer than 25 employees, opting for SEIS funding would be an appropriate course of action.
2. Borrowing from a Venture Capital Trust (VCT)
A venture capital trust (VCT) is an HMRC-approved investment company that has the ability to invest in or lend funds to unlisted companies. You might be able to get a VCT to invest in your start-up if your company has less than £15 million in gross assets, less than 250 employees, and has not been in business for more than two years. If your start-up participates in research & development or technology niches, you may have access to higher funding limits than other companies.
3. Take Out Several Lines of Business Credit
If you follow a comprehensive business credit building strategy for six months to a year, you should have a credit profile sufficient to earn you approval for a diverse range of business credit cards and trade agreements. Most start-up owners don’t even know that the average small business can gain access to about £70,000 – £100,000 in business credit just by applying for about 10-15 lines of credit. Of course, you’ll need to practice responsible credit management to ensure that your credit limits are optimally utilised, as failing to do so will negatively affect your company’s ability to obtaining financing in the future.
4. Apply for a Business Loan
The most straightforward way to obtain a large sum of capital for your start-up all at once is to apply for a business loan. Amounts for these loans will generally range anywhere from £5,000 up to £100,000, but your limit will be based on your company’s current creditworthiness. You may want to consider applying for alternative loan types as well, such as those found on peer-to-peer lending networks. On the other hand, if you have built a strong relationship with your bank that may be the best place to start.
5. Find a Business Partner
Finding a business partner who is willing to put forth some of their own money to fund the business is another option that often works out quite well. In a way, this is a lot like finding an investor except it’s a more involved ongoing business relationship in which the financier can actually play a role in running the business. In addition to providing funding, an ideal business partner could also provide the benefit of having access to an extended network of corporate contacts and connections.
6. Utilize Invoice Factoring and Trade Credit
Invoice factoring is a kind of borrowing that allows you to get paid for outstanding invoices that your clients or customers haven’t yet paid. This is an ideal option to consider if your company has established a history of receiving large invoice payments from repeat clients on a timely basis. If you can show proof of this, invoice factoring companies will usually loan you the full amount of your pending or future invoices.
7. Launch a Crowdfunding Campaign
Crowdfunding is an interesting funding opportunity for North-East start-ups because there are really no barriers to entry. If you have a great idea and are willing to start marketing it to an audience online, you could get ordinary people to start investing in your start-up’s proposed products or services. Sites like IndieGogo and CrowdCube are examples of crowdfunding platforms that are worth looking into.
8. Liquidate Some Personal Assets or Sign a Personal Guarantee
Finally, if none of the funding methods listed above are working out for your start-up, you could resort to using some of your own wealth or credit to back the company. This could be done by either selling personal assets such as extra vehicles or rental properties, or simply by signing a personal guarantee when applying for a business loan. A personal guarantee lets start-ups with no credit history obtain large lines of credit by using the company owners’ personal credit as the primary approval factor. However, keep in mind that you would be personally responsible for repaying this debt.
A Quick Tip to Fast Track Your Business Credit Building Efforts
Since many of the methods listed above will rely on your company having a decent business credit history, it’s important to carry out a well-rounded business credit-building effort. One way to expedite the process of giving your company a better credit score is by establishing and maintaining large lines of secured credit in which you use your own money as collateral. That way, instead of signing a personal guarantee and potentially putting those funds at risk, you could deposit say £10,000 into a secured line of credit and then use those funds to pay for expenses while also making your monthly payments in full and on time. By doing that, you can give your company a history of dealing with large credit lines, which will make you eligible to obtain approval for similarly sized lines of credit after you’ve kept the account in good standing for a while.
These tips should enable you to locate Funding and Support Opportunities in the North-East area, so that you can grow your start-up as quickly and efficiently as possible.