Focus on funding: the options

Starting an online store is a cost-efficient way of realising your business dreams; cost efficient but by no means free. Unless you have coffers full of savings ready to plough into your new venture the chances are you’ll need to find funding to get your shop up and running.

There are a number of ways to find capital to start off your new venture – some traditional, others less so.

In this article we will:

1. Discuss why you might need funding
2. Explore the different avenues open to you
3. Why do you need finding

Despite the fact that it has never been easier to start an online retail store, it still comes with costs. To meets these, you may need to have funding in place to cover them before you start making sales. This stage of business finding is known as seed funding – it is the initial capital used to start a business.

There are a number of options when setting up the store – online shop building platforms are plentiful and you can get some great deals. But you want to launch with the best store that you can – if you want a chance at survival – your offering has to be attractive.

Depending on what kind of products you are planning to sell you might need to drum up enough investment to pay for the initial stock. You need to have enough in your product line to keep customers interested. This will require speculative purchasing.

Funding will ensure that you don’t have to cut essential corners.

How to get funding

Savings

This is a pretty obvious place to start. If you have a pile of cash saved waiting for a rainy day – the start of your new enterprise might just be the chance to use it. Using your own hard earned cash means you don’t have to start your business with debt which is a wonderful opportunity.

You can retain complete control over your business and you won’t be working for anyone else but yourself. Anyway – your money probably isn’t making any interest sitting in the bank with interest rates at rock bottom.

Family and friends

The people closest to you will have a vested interest in your business doing well – they want to see you create a successful business. If they are in a position to help you out with startup capital then it is often worth talking through the options.

It is likely that you will get more favourable borrowing terms from your loved ones. One thing to watch out for is not creating a proper contract. There needs to be a set of terms which all parties are aware of, regardless of how close you are to your sponsor.

Banks

Banks are swiftly becoming the last place an entrepreneur will turn to for money given their reported reduction of business loans. However, if you have a good relationship with your bank and a solid business plan, there’s no reason why you shouldn’t approach them and see what they say.

You might be able to secure a loan against your personal assets or you could look into the Enterprise Guarantee Scheme and see if you are eligible.

Crowdfunding

It’s the new kid on the block when it comes to funding but it has taken off quickly – there are now plenty of crowdfunding sites for you to choose from. It works on the premise that you borrow lots of little amounts from lots of people rather than one big sum from a single investor.

The sites all work slightly differently – some will ask for equity in return for investment other will simply ask for some kind of reward. Check them all out and see which one best suits your needs.

Asset finance

There are some independent lenders other than the banks which will be willing to give you some cash against assets you already have. These could be tangible assets such as a house or car, or simply an invoice.

MarketInvoice is one of the companies that will help you raise cash against invoices. If you fancy looking into how to use your physical assets then borro is a popular choice.

Loans

If you don’t have any of the kind of assets mentioned above there are other lenders which might suit you. IWOCA (instant working capital) is a lender aimed at helping retailers who have a presence on marketplaces such as Amazon and eBay to get some extra cash.

Cash lender Wonga has also started serving businesses so might be an option. Always make sure you are aware of the interest you will be paying on these loans – you don’t want to end up getting saddled with difficult repayments.

Grants

There are a number of grant schemes available to startups which get distributed through ministries, departments, quangos and councils. These publicly funded schemes are designed by government to encourage enterprise and are available to most companies.

The process of applying can be quite rigorous and time consuming so don’t expect payment over night. However with a bit of research you could be eligible for help.

Business angels

These are individuals or groups who offer cash in return for a share in your business. They can be found through a number of different way – might be an acquaintance or an ex-employer or simply someone you come across on a funding network – they can be hard to find though.

There are angel networks which could help to match you with a suitable investor or you could approach the British Business Angel Association to see if they could help.

This feature is supported by Iwoca