Lockdown, restrictions, and distancing….we’ve all had a lot of time to think about our priorities and goals lately. As such, many of us have decided to take the plunge and to become our own bosses. Whilst it’s a brave, often nerve-wracking decision, it’s also an incredibly rewarding one.
Due to a global pandemic, the ongoing uncertainty over the effects of global shipping, and fast-rising inflation, we think it’s fair to say that the rules of the game have changed somewhat for small business start-ups in 2023.
Investors are naturally going to be more cautious as the year unfolds, with belts tightening across the globe and prices of goods and services increasing. But finding the funding to realise your dreams and visions needn’t be impossible. With that in mind, here are some tips for financing your small business start-up in 2023.
FINANCING YOUR START-UP
Once you have a firm handle on your start-up’s primary revenue streams, USP and target market, it’s time to consider how to make your dreams a reality via the appropriate funding. How you choose to finance your business, and the autonomy you give away in return, will have a huge impact not only on how much money you make from the project, but also on how much you stand to lose.
SELF-FINANCING YOUR START-UP
If retaining full control of your start-up is your number one priority, then it’s essential that you self-finance as much of your business as possible. With only a small percentage of lenders willing to offer loans to a new business, accessing funds to get things going can be a real obstacle. Besides, securing credit can involve high-interest rates which may lead to high debts and, eventually, business closure.
The best option for any start-up – if you have the luxury of course – is self-financing, as you will stay in control of investments and, in turn, your company. There are also other ways to self-finance a business apart from personal savings and funds from friends or family, so consider these before the process of planning truly begins.
EXTERNAL HELP IN FINANCING YOUR SMALL BUSINESS START-UP
Of course, you will likely have more scope in terms of investment if you decide to seek external help in financing your small business start-up. Here are just a few options available:
- Microloans
Unlike banks and other loan outlets, microloans come from nonprofit lenders and typically don’t exceed $50’000 in value and six years in duration. The amount offered is usually shared between a large number of lenders to limit risk.
Often, this type of loan is offered to impoverished borrowers without a credit rating, collateral, or steady employment, often in developing countries. Loans for women have become a key principle of microcredit, with women making up 75% of all micro-borrowers worldwide.
- Small business loans
If you have solid credit, you can get your business functioning with the help of government-guaranteed loans from the Small Business Administration (SBA) in the US, or via the Apply for a Start-Up Loan government platform in the UK. The latter ranges from £500 to £25’000.
These small business loans come with lower risks and fair interest rates. Not only that, but both the SBA the UK government’s Apply for a Start-Up Loan scheme also provide counselling and education so you can use the loan in the most effective way.
- Online loans
You can access online loans from firms that offer such. The funding is faster and makes it a feasible option for those who need the loan faster than the traditional loan approval process allows. Entrepreneurs with good credit can access low-interest and longer-term options, though rates may not be particularly favourable for first-time borrowers.
- Accredited Investors
Accredited investors are, by definition, individuals who have a net worth of over $1 million or an annual income of more than $200,000. They tend to operate alone but sometimes team up with others to form a fund – in exchange, they gain ownership equity in the company. The financial investment on offer is only a small part of what such investors, often referred to as ‘angel investors’, provide. Equally important is their guidance, expertise and access to markets and contacts which would otherwise be difficult to penetrate.
- Venture Capitalists
VCs, or venture capitalists, are similar to angels but at a larger scale, and will usually concentrate on investing in mature companies. They will also tend to insist on having hands-on involvement in your business to ensure that the cash flow and ROI they require are achieved. With a solid business plan, you can approach an angel or VC and request assistance in providing capital to your business.
CROWDFUNDING
Crowdfunding, through services such as Kickstarter and Indiegogo, can offer benefits far beyond simply raising capital. Doing so gives small business owners the opportunity to meet and interact with like-minded people who you perhaps wouldn’t usually engage with, and a well-orchestrated crowdfunding campaign can serve as fantastic marketing when carried out astutely.
DETERMINE YOUR BUSINESS STRUCTURE
If you are considering parting with a share of your start-up, do check out these 8 different types of business structures for start-ups in the UK to learn more about the different options available to you.
SECTORS DUE A POTENTIALLY LUCRATIVE 2023
Market forces are shapeshifting at such a rate that it can be tough to keep up with what’s in, what’s out and what’s on the fence. That said, there are some sectors which look to have the potential to make money in 2023 and beyond. If you’re considering the success of your start-up, it’s first important to consider these:
- Professional Services
Companies in the so-called ‘professional services’ industry don’t sell a product, per se, but rather, their knowledge and experience. If you have talent or expertise in a particular field, you can monetise this niche knowledge to bring profit to your small business.
- Healthcare, Wellness, and Fitness
Our health, both physical and mental, has never been more in the spotlight, with interest in wellbeing commanding attention from a variety of sectors. If you have a unique angle on staying healthy, this decade could be an incredibly lucrative one for you.
- Affiliate Marketing
A fairly modern phenomenon that relies on performance-based marketing, affiliate marketing is a revenue-generating media for people online. Users are compensated as a third party by a company to generate traffic, leads or sales for the company’s products and services.
- App Development and Coding
Learning to code brings with it a wealth of opportunity in the digital sphere. Whilst it doesn’t take long to pick up the basics (courses are available online), those who are able to master coding can expect a lucrative career. If your new business start-up revolves around tech, and particularly, an app, a knowledge of coding will be highly beneficial and likely lucrative.
- Running an Online Store
So much of our purchasing power has moved online, and this has been quickened by the COVID crisis. Online stores, when run diligently, can be highly lucrative. You can even consider running your start-up through established e-commerce sites like Etsy, Amazon, or eBay. You could also build your website on a platform like Shopify.
You should be aware that internet business is volatile, and you have to be abreast of customers’ desires to make an online store work for you.