Funding is an extremely important part of launching your Business and this is what ensures the smooth progress of any Company. When you setup a Business which is an online platform for website creation, you will need to assess the funds required.
To create a website development service or a website builder service, there are considerable funds associated with the Business, like Operating costs, Marketing, Rent, Rates, Mortgage, Electricity, Insurance, Internet, Telephone, Accounting, Salaries, etc.
Entrepreneurs can use personal savings or contributions from friends or family to inject into the new venture. However, nowadays there are external sources of finance apart from the above, which we will explain below:
Government Grants
These funds do not have to be repaid.
The government regularly launches funding programs for Businesses in a range of sectors and these programs have a set of funds allocated to Innovative projects, which create jobs in the area, help drive growth in the Economy and offer a positive contribution to the society.
Grants are available at local, regional and national levels. Local Grants are lower in amount, fewer in number and are available to the local area. However, competition is extremely high, as there are only limited funds available.
Regional grants focus on the region, for example in the UK, regions are London, Midlands, Yorkshire, Scotland, etc. These grants offer the best funding for the applicant, however, the conditions require diversity in the Business in the form of employing people from different backgrounds, with a disability, etc.
National Grants are available for multiple businesses in the same program, who can also benefit from tax breaks. However, there is high competition due to a large number of applicants.
Venture Capitalists
Known as Investors inject large amounts of money in the Business in exchange for a percentage share of the Company.
The primary objective of Venture Capitalists is to gain a return on their investment quickly by assisting the Business to grow rapidly.
Once they have regained their initial investment, they could chose to re-invest or exit the Business.
Bank Loans
This is a loan from the bank and must be repaid over a period of time with interest.
These loans are available at a range of amounts, interest rates and repayment periods, which is why it is important to conduct extensive research before accepting any offers.
Conditions apply, such as a trading history, amount of annual turnover generated in the business, no existing debts or County court judgements against the director, financial and management accounts must be submitted.
If you have an Account with your Bank, a good credit history, then it helps in being accepted much sooner and offered a low interest rate and longer repayment period. However, if you are approaching other Banks, the process can be time consuming.
Short Term Loans
Are available to access on a prompt basis, however, they need to be repaid within a short period of time. This kind of finance helps with the daily expenses or funds required for a project.
The downside of obtaining this loan is interest rates and fees associated with this loan could be very high.
Long term Loans
Are available from external loan providers in the form of secured and unsecured loans. These can be repaid over a period of 2-10 years.
Secured loans usually have lower interest rates, however, security against the loan must be provided in the event of a default on repaying the amount. The security provided could be an asset of the Business or a charge on a property.
Unsecured loans usually come with high interest rates, as no security is provided against the loan. The fees, costs and interest rates charged by loan providers can vary and be very high depending on the credit history and trading record of the applicant.
Guaranteed Loans
This type of loan scheme is created for small businesses that do not automatically qualify for bank loans. It is called the Enterprise Finance Guarantee.
The reasons for not qualifying for bank loans could be because the business has only recently launched and as a trading history does not exist, they cannot offer any security against the loan.
Strict conditions need to be met in order to obtain this loan.
The disadvantage is the interest rate is high and additional fees are applicable.
Recommendations
Grants are usually the best type of Finance, as these funds do not need to be repaid. However, the conditions attached to securing the funds are very strict.
Bank loans are the next best source of finance, as the interest rate can be low if you are customer with the bank for years and have a good credit history, along with a successful trading record.
Other loans acquired through external providers with low interest rates and long term repayment periods are the most suitable for any Business venture. These loans can be usually obtained in the form of a secured loan, where an asset is provided as security against the loan in order to benefit from a low interest rate.
Many Businesses, including online web design sites try and secure finance of any kind to catapult their Business to create a new website.
