So you’ve got a great idea for a business. There’s genuine demand for the product or service you have in mind and you’re confident that it will be the next big thing. However, you need the cash to get started. What now?

There are various options available if you are looking to get your business off the ground. From crowdfunding to traditional bank loans, let’s try to cut through the jargon to help you find the best start-up funding option that suits your needs and circumstances.

Whichever option you try, funding your start-up will remain one of the hardest challenges you will face. Whatever your big idea is, good luck with getting the funding and with lift-off.

Business loans

Although banks tend to be reluctant to lend money in the current economic climate, you can increase your chances by presenting them with a solid business plan. Most banks have tightened their lending criteria over the last few years, and so anything you put forward has to show commercial viability for the bank to grant you the requested funds.

A good business plan typically outlines your business concept, including industry sector, market, and product or service. You also need to include industry analysis and trends, your marketing plan, financials, the capital needed for your start-up and how the capital will be used.

As most funding options will require you to put together similar documentation, it is a good idea to draft one even if you are not planning to approach a bank for your start-up cash.

The plus side of obtaining capital through your bank is that you have safeguards over repayment as both you and the bank are governed by law. The terms are clear and often repayments don’t begin for some time, allowing you to build up the business. Banks also have access to resources which can often be useful to you as an entrepreneur. If you can maintain a good relationship with your bank, borrowing in the future will be easier for new ventures or to invest more in your existing one.

The downside to applying for a bank loan is that rejection rates tend to be high, and the time taken to reach a decision can be lengthy. Banks also have finite resources and even if they agree to a loan in principle, it may take a few months before the money appears in your account.

Self-financing

Self-financing is another way to get the funds you need to launch your business. Regardless of whether you borrow money from relatives or remortgage property to raise the funds, very careful thought and consideration to possible outcomes has to be given.

Not many of us could live with ourselves if our grandparents’ retirement funds disappeared due to our actions, and neither would we feel particularly good if our family had to move into another home because the old was sold to pay debts.

Banks also have access to resources which can often be useful to you as an entrepreneur

Therefore, to use this option you have to be 99 per cent certain that the business will succeed.

The plus side of self-financing is that at least in theory you have more control over the funds and, depending on what arrangements you have with your family, control over when and how much you pay back. This flexibility can give you advantages in business.

Mortgage repayments obviously have to be paid on schedule, but it may be possible to secure cheaper repayment options for the first few years, or fixed rate interest deals. This can be a real bonus in the first few years of a new business.

Angel investing

Angel investing is simply where you make a pitch at an investor or group of investors and if they like it, they will invest in your business in return for a percentage of it. This is a viable way to attract funding and many businesses have benefited from it. The secret to attracting investment is that your business concept is well thought out, and you can sell it.

The downside to angel investing is that you are giving away a part of your business to someone else. They may want a controlling input too, so details have to be ironed out at the start. If you are new to business and negotiation, you may want to seek independent advice before signing anything. Shrewd business people will be good at negotiating the best deal for themselves, leaving you with a bitter taste and regret further down the line.

Crowdfunding

Crowdfunding is a little like angel investing, but instead of pitching an idea to a few people, you publish the idea online to attract investment from potentially millions of people. Most commercial enterprises that have used this kind of funding practise equity crowdfunding. This is where the investor has a share in your business and receives a return if the business is successful.

As investors can donate as little or as much as they want. It can be a viable way to generate the cash needed for your start-up.

The secret is to have a solid pitch that really sells what you do and how it benefits potential customers. Entrepreneurs often use videos to demonstrate products and services in action, and it is the pitch that really determines how much money you can raise.

The downside to this is that normally projects which are concept driven tend to attract the cash. Environmental and art projects do very well on crowdfunding sites. Also sites such as Kickstarter.com are very specific at what they will accept. As each investor is a shareholder, you could see yourself paying out quite a bit of profit to your crowdfunders.

If you like the idea of crowdfunding, visit www.crowdfundingnetwork.eu. This includes free resources to help you get your crowd funding campaign off the ground.