Funding your own business

You might be asking yourself, who funds a young person’s business? Well, it’s more people than you think. As long as you have a good business idea and can prove that it’s gonna be profitable, you should be able to get some decent investors. Here’s our advice and support for funding your own business.

The Prince’s Trust Enterprise programme

If you’re unemployed and aged 18-30, this programme could help you put your business idea into action. It involves a four day course where you’ll learn all about running your own company. That way you can see if it suits you. After this, you’ll get one-on-one support and mentoring to help you get started.

Important – as part of the Enterprise programme, you can apply for a start-up loan but there’s no guarantee that you’ll get one. They’ll defo help you apply though, or point you in the direction of other suitable funders.

Shell LiveWIRE

This is a not-for-profit organisation supporting entrepreneurs aged 16-30. It offers:

• A networking and discussion forum for young entrepreneurs
• A monthly competition for young people to win one of up to five £1,000 prizes to develop an innovative business idea
• An annual chance to win the Shell LiveWIRE Entrepreneur of the Year award. It comes with a prize of £25,000, and heaps of media exposure for your business

Plus, it’s super simple. All you have to do is create a free account on the website and then upload a 30-second elevator-pitch video about your business ideas.

Borrowing from the bank

This comes with a warning that banks aren’t at their most generous at the moment. Especially when it comes to young people with no career history. However, if you truly believe that your business plan is rock solid, it’s worth approaching them. There are two main ways to get business money from a bank. Either way you go, you need to be really careful and get clued-up about what the risks are. It isn’t exactly the same as government funding for self employed people. This means that, ideally, you should speak to an independent financial advisor before you approach a bank.

1) Overdrafts

This is a short-term fix to spending more money than you currently have in your bank account. You’ll need to agree an overdraft limit with your bank, and you’ll probably end up paying interest. Lucky for you, we’ve got an article on overdrafts here with more information.

Watch out though, the interest rates are usually really high and your bank can decide it wants the money back AT ANY TIME. If you don’t pay it back, it could affect your ability to get loans moving forward.

2) Business loan from the bank

These are tricky to get since you’ll need to meet certain eligibility criteria. But that doesn’t mean they’re completely out of the question. Make sure you shop around for the best deals, rather than simply trying your regular bank. For example, look for banks that are promoting business accounts at the moment. 

Just keep in mind that the bank won’t give you money without security (that way they cover their asses). So there’s an element of risk. In fact, banks will often ask you to put your own money/house/livelihood on the line as collateral. Since you never know what might happen, we’d recommend avoiding signing anything away that you can’t risk losing.

Crowdsourcing funds for a new business

Rather than hitting one bank for one lump sum, why not hit multiple strangers for lots of tiny bits of cash? Crowdfunding websites such as Kickstarter and GoFundMe are great for helping you cobble together the cash you need to get a project started. Make sure you read all the small print though. 

Usually these websites take a percentage of the money. Plus, they may only give you your donation if you reach your full intended amount. Not to mention some won’t accept funding for self employed/start up businesses, only creative projects, like short films or albums. But, even then, a one-off great creative piece could raise awareness of your talent and make it easier to secure funding later.

Find a private investor

This is basically the opposite of the government funding a self employed person. There are plenty of moneybags out there willing to invest in The Next Big Thing. Just watch Dragon’s Den if you don’t believe us. Speaking of which, there are loads of websites, such as Angels Den, that you can join to get access to these business bigwigs. 

Basically, you submit your idea and expertise, and you’ll be given training and funding in exchange for a cut of the profits. Be wary though. There’s often an upfront fee and a ‘success fee’. The latter means that you’ll be signing away a big hunk of your profits before you even make them. You’ll also constantly be answering to your investor. So you won’t have the independence you may crave.

Other places to try

• Responsible Finance represents institutions which provide loans and support
• British Business Angels Association is a directory of investors interested in supporting new businesses
• The National Enterprise Network is a directory of local enterprise agencies which might be willing to help you
• Scotland Business Gateway offers practical help and support to Scottish entrepreneurs

For more info about starting your own business, government funding for self employed people and self employment in general, check out the rest of our resources here. You can also check the gov.uk website here.

Help during the pandemic 

Of course none of us want to relive the horrors of lockdown. However it’s still important to acknowledge the self employment income support scheme set up to provide financial support for self employed people. 

The scheme involved individuals being able to claim a grant covering some of the costs of their business. It should be noted that they were usually able to do this without even contacting HMRC. This was active from March 2020 to 30th September 2021, meaning the grant system may have closed by now. To claim, business owners had to show their turnover figures during a certain period, for example for April 2020 and April 2021. After you found out if you were eligible (which has something to do with your average trading profits), you could’ve claimed a fourth grant, or even a fifth, between May 2021 and the scheme’s closing date. 

To find out more, click here.