Thank you for your question. In my opinion starting your own business
is about the bravest thing you can do! In this answer I’ve set down an
overview of obtaining finance for expansion in the UK, and details for
some organisations that may be useful to you. I’ve also included links
to sources on writing business plans, etc, but as your site is already
up and running you may be past this stage already. What I have
realised when researching this question is that obtaining finance will
be a long and complex process for you. Please use what I have found as
a basis for your studies. If you have any further enquiries, or if you
think I’ve not been clear on some points, please request an answer
clarification before rating the answer.
Please also note the disclaimer at the bottom of this page. Google
Answers does not supply, and is not a substitute for, professional
advice. There are numerous organisations that advise small businesses,
and you would be well advised to seek their counsel. Similarly, and
this is a personal tip, don’t even think about doing business with an
investor without having your own lawyer look over the deal and explain
it to you. The other legalistic point I would mention is that as a
private limited company it would be a criminal offence for you to
advertise for investment to the general public, for example by an
advertisement in a newspaper. That doesn’t include soliciting
investment from Venture Capital providers.
The first thing you should do if you haven’t already is check out the
Government’s Small Business Service website at http://www.sbs.gov.uk ,
it contains basic information on many issues affecting small business,
including finance. It mentions that the two main routes of finance are
bank loans and venture capital. The important distinction between the
two is the simplicity of the arrangement. The bare bones of a bank
loan are simply that your business is lent money, and has to pay it
back with interest. The bank may require a lot of information from you
about your proposed plans for the business, and insist on a
supervisory function. Be aware that despite having a limited company,
unless the company has significant assets a bank will insist on you
giving a personal guarantee on the sum borrowed. If you have no real
assets (such as owning your own house), then you may find obtaining a
loan at all.
Venture Capital on the other hand involves issuing shares to an
investor in return for cash. He will then own a sizeable portion of
your business, but hopefully this will be balanced by the business
performing well due to the investment. The investor makes a profit by
any dividends you pay out each year (distribution of profits), or by
waiting until your business has really taken off before selling his
shares for a greater sum than he paid for them. This means that once
you enter into an arrangement with an investor there’s no going back,
since that chunk of your business will always be owned by someone else
unless you buy the shares yourself. An investor will rarely agree to a
legally binding option for you to buy back the shares. Venture Capital
companies are similar to “Business Angels” – wealthy individuals who
make occasional investments in young companies, often without basing
their decisions on numbers so much as “hunches”. The Venture Capital
companies on the other hand are more institutionalised and handle six
or seven figure deals. Business Angels usually deal with investments
well under £250,000, and could be right for the presumably much
smaller sums that you are interested in.
Another option of course is a fund. There are hundreds of grants,
growth funds and government-backed loans out there, especially since
the Scottish Executive took over this area. One site that is certainly
worth a look is the Highland and Islands Enterprise Network.
Highlands and Islands Enterprise Network – Inverness and Nairn section
- http://www.hie.co.uk/ine/finance-for-business.htm
They administer some funding schemes, but tend to look for
community-based businesses that will create jobs and help local
economies. This may not be suited to your internet-based business, but
their remit still includes giving advice to Scottish business, and you
should avail yourself of this useful and free resource.
The Scottish Enterprise site is the base of the governmental
development agency for Scotland. This site contains a wealth of
information about finance and marketing, and is where I found much of
the information for this answer.
Scottish Enterprise – finance
- http://www.scottish-enterprise.com/businessdev/finance/
They also lead to what might in the end be the most useful link in
this whole answer. Business Angels are by their nature hard to track
down, and are usually found through “contacts”, which is another way
of saying “the old boys club”. LINC Scotland however act as an
introduction agency between start-up / small enterprises and those who
have money to invest. They state that the usual figure is around
£25,000, but that this can be more. They take your details and
circulate them in a bulletin to investors that subscribe to their
service. The fact that this service is linked to by Enterprise
Scotland, and is part funded by the European Development Fund,
suggests that they’re not cowboys. They do however charge you £75 plus
VAT to register, and charge you another £350 plus VAT if you do manage
to get your hands on any money. Hopefully then you won’t mind!
LINC Scotland
- http://www.lincscot.co.uk/
Scottish Enterprise – Business Angels
- http://www.scottish-enterprise.com/businessdev/finance/businessangel/
This brings us on to our next point – the business plan. No one in
their right mind is going to give you any money unless they know
exactly where it is going. LINC Scotland says that before you contact
them you should have:
“Generally a well prepared business plan and executive summary, plus
up to date accounts if you are an existing business. Also a clear
statement of how much investment you need and what it will be used
for, together with an idea of what you would like the investor to
bring to the business besides money. And finally, a genuine
willingness to share ownership in order to achieve real growth and
higher returns.”
So you need to look at exactly how you are going to market your site.
That information is outside the scope of the question, but here are
some links on producing a business plan.
Scottish Enterprise – Writing a Business Plan
- http://www.scottish-enterprise.com/businessdev/finance/plan/
Wales Fund Managers Business Plan Checklist
- http://www.wfml.co.uk/
The Guardian – Writing a Business Plan
- http://money.guardian.co.uk/startingasmallbusiness/story/0,11875,684909,00.html
The Centre for Enterprise and Innovation at Southampton University
- http://www.cei.soton.ac.uk/students/idea/plan/
... and there are many others, do a Google Search of UK sites under
“writing a business plan”:
I hope this information has been of use to you. As I’m sure you’ll
appreciate this is a complicated area, full of pitfalls. The key is to
know what you’re getting into, and to get professional advice. Thanks
again for giving me the opportunity to answer your question, and if
there’s anything else at all you want to know do please ask.
jumpingjoe-ga
search strategy:
Google Searches:
“writing a business plan”
finance investment venture
Personal knowledge |
