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Should SMEs look to alternative crowdfunding?

September 16, 2014 by Guest contributor

Should SMEs look to alternative crowdfunding?{{}}

2014 has been heralded as the year for crowdfunding. There are literally hundreds of platforms for people to choose from, but with share-based crowdfunding on the rise, consumers and small businesses are faced with a difficult choice.

Traditional crowdfunding platforms have huge user bases, tailored for product-based start-ups, which means that if you are lucky enough to make it onto the ‘Popular’ feed, your business idea will be viewed by millions. If, on the other hand, you don’t instantly capture the imagination of would-be investors, your chances of getting funded through these types of crowdfunding sites tends to decrease significantly.

While traditional crowdfunding platforms with product-based models might be good for getting consumer-focused propositions backed, they are less effective when it comes to B2B companies, which may have products and services that are less appealing to the traditional crowdfunding investor.

Don’t give your money away

The biggest issue with well-established crowdfunding sites is the high commission demanded – typically between 5% and 10%. Bootstrapped start-ups need all the financial help they can get and this is one of the many reasons we and other small businesses are increasingly choosing to go it alone with DIY crowdfunding.

Know your investors

One of the greatest benefits of DIY crowdfunding is the information businesses receive about their backers. Where traditional crowdfunding focuses on getting the money through the door, you won’t know necessarily why or where your product adds value to those people.

By setting up your own crowdfunding site or even by looking for VC funding, that market research data is more readily accessible. Moreover, it enables the business to constantly better itself and innovate based on feedback from the customer, business or angel.

When success also means disaster

One of the biggest problems with most crowdfunding platforms that have recently been damaging start-up businesses is being over-funded. Although some of the most recently built sites such as CrowdCube are able to trade in shares, traditional product-based crowdfunding platforms do not. This means that businesses opt to give something else away in return for investment – usually the product itself.

This isn’t often an issue for most businesses because the funding provides the opportunity to scale production. However, when campaigns are grossly over-funded, this can cause problems with meeting the demand for products in exchange for funding, rather than focusing on ‘paying’ clients.

Examples of this can be found all over traditional crowdfunding platforms and can cause massive delays for the business. While some may view this as a justifiable sacrifice, there are risks involved with this that can impact on the successfulness of the business’ future. You can spend so long fulfilling those owed orders that you’ll never have time to fulfil any new ones.

If not broken, breaking?

The huge user bases of popular crowdfunding platforms still make them a very attractive option. That said, as fewer start-ups are willing to give up such a large percentage of their funding in commission it isn’t difficult to see a future in which start-ups primarily use their own platforms for serious funding.

In-house developers within tech start-ups make creating self-funding platforms a realistic proposition, particularly if it provides flexibility and information as well as funding. These DIY crowdfunding platforms also provide the consumer with a much more interesting investment opportunity: not only being able to buy the product, but also buy shares in it.

Perhaps the product-based crowdfunding model isn’t broken just yet, but with more and more small businesses creating self-funding platforms, to crowdsource more serious investment, it can certainly be argued that the writing may be on the wall – especially in the B2B space.

Copyright © 2014 Tim Fouracre. Tim Fouracre is CEO of Clear Books. Clear Books is currently raising £3.3M, which will be the largest ever B2B crowdfund in the UK.

Further reading

How long can you bootstrap a start-up before real investment is required?

August 18, 2014 by Guest contributor

How long can you bootstrap a start-up before real investment is required?{{}}Battle lines have been drawn in the entrepreneurial world, with venture capital squaring up to its penny-pinching cousin, bootstrapping.

Before budding entrepreneurs can reach the dizzying highs of business triumph, they must first launch their idea off the ground, and this requires finance. Venture capital (AKA private equity) is hard to obtain, competition is immense and investors can be reluctant to hand over their capital without evidence that the business can work and eventually bring a return. Most start-ups must go through a phase of bootstrapping before they can prove to investors that they are a good bet. The question is – can bootstrapping successfully continue indefinitely?

Bootstrapping means entrepreneurs going it alone, by whatever means possible. This can involve tapping into savings and accumulating private debt, including loans and borrowing on credit cards. It is clear that if bootstrapping goes wrong, it can go terribly wrong for the individuals involved.

However, there are also many positives associated with bootstrapping. Bootstrapping does not mean sacrificing equity, and it allows entrepreneurs to keep control of their business. This can seem undeniably appealing; the dream of starting your own business is, after all, about freedom. Bootstrapping allows business owners to call the shots (and, perhaps, make their own mistakes).

Investing personal finances arguably promotes caution, and a real consideration regarding where money is being spent. When their livelihood and savings are on the line, people tend to think through every business decision with precision. Lastly, when you bootstrap there is only one possible source of income, and that is your customer. Pleasing the customer is an essential element of business that many failed start-ups somehow seem to have missed, and bootstrapping can help prevent this. Yet, for many businesses, a point is reached when the credit cards are ‘maxed’, when customer revenue cannot come in fast enough and at that time growth crawls. Bankruptcy is a real possibility and driving the business forward seems unfeasible. 

It is hard to obtain venture capital backing, but it is also hard to grow your business at a sufficient rate without it. Focussing on building the product is not enough, marketing and sales must be grown if the business is to succeed. The fact of the matter is it takes money to be noticed.

Hiring is affected, too. When candidates look for a job with a start-up, they need to know that the business they might join is financially secure, with viable plans for growth. Investors can provide credibility and reassurance. Joining a start-up can feel like a risk to many, and if the business is stagnant and relying on personal investment to stay afloat, it may not seem like a risk worth taking. For business to attract the best, they need to not only be ambitious, but also have the finances to back up their ambition.

It is all about the rate of success. If your business survives bootstrapping financially, it still faces the hurdles of sustained growth and marketing without an influx of investment. When it comes to starting your business, bootstrapping is for the beginning – otherwise it can be the end.

Copyright (c) BlueGlue 2014

Further reading

What's the point of startup accelerators?

July 28, 2014 by Guest contributor

What’s the point of startup accelerators?{{}}It’s accelerator season again and applications are being accepted for mentoring from TechStars London, Oxygen Accelerator, Dotforge and more. Lots of entrepreneurs and investors see accelerators as a vital part of starting a tech company – but are they really for everybody and do you really need to attend one?

What is an accelerator?

Most UK startup accelerators work in the same way: they’re three-month programmes for your startup that feel a bit like going back to school.

Simon Jenner, CEO of Oxygen Accelerator, the accelerator I attended, explains: “Launching a startup is hard work. All an accelerator does is concentrates that hard work and surrounds founders with people who have vested interests in making their startups succeed. Entrepreneurs who like being challenged will exceed all their expectations and thrive in an accelerator.”

Beans on toast

Most startups enter an accelerator programme to get funding. All accelerators culminate in a demo day, where founders pitch their creations to a room full of investors, vying for any form of interest that could turn into a coffee, chat and maybe a nice, fat cheque.

But don’t join an accelerator for the money. The purpose of the small investment is to simply keep you alive for the three months of the programme.

Take a long hard look in the mirror. Decide if you want to put yourself through something like this. You better get used to having beans on toast for dinner or making big cheap meals that’ll last you all week. And say goodbye to spending a small fortune on a night out. You need to live cheaply and healthily and work as hard as possible.

How it works

Most accelerators are split into three phases:

1 Death by mentor: This is the most mentally grueling thing I’ve ever done. In less than two weeks I met more than 100 mentors for 30-minute one-to-one sessions. Some will tell you you’ll go bust in a week, others will be more positive. Take the criticism well and spot the trends.

2 Build, build, build: You can’t build anything during phase one, and you now have fewer than 10 weeks until demo day, so it’s time to launch, iterate, learn and repeat.

3 Sell, sell, sell: Time to segment your team, with one person focusing on building relationships with investors, and the rest trying to make the damn thing make money.

The smooth with the rough

Deciding whether or not to go to an accelerator is down to you. On the plus side, accelerators put you and your business in an environment that will help it thrive, surrounded by experts who’ve been there. And there’s a chance you’ll secure investment.

On the downside, you will be criticised repeatedly, you won’t have a social life and it’s tough financially. For every Buffer, TaskRabbit or Dropbox there are probably more than 50 successful startups that didn’t graduate from accelerators, such as Facebook, Twitter and Huddle (and they’ve not done too badly).

If you think you’ll get value from an accelerator and know what you’ll face, you should at least apply for one – what’s the worst that could happen?

© James Pursey. You can tweet him on @JamesPursey if you’d like to know about how he’s putting his experience from Oxygen Accelerator into practice at carwow.

Further reading

Do small firms really need bank finance as much as we're led to believe?

June 16, 2014 by Guest contributor

Do small firms really need bank finance as much as we're led to believe?/English money{{}}I have a Room 101 nomination. It’s media headlines and political comment telling us that 'businesses are unable to access funding from banks, we have to get the banks lending again, we need to make alternative funding available'.

This has been so noisy since the 2008 sub-prime bubble burst that I’m convinced it’s merely a default utterance when political parties sense that 'business' hasn't been in the headlines of late. The tone sounds so desperate at times as to imply an imminent hiatus if this matter isn't addressed. I’m not convinced that the need for bank funding is as important as we’re led to believe.

We accept as fact that since 2008 the banks have reined in their lending, as a response to previous over-lending. A good entrepreneur will secure investment from other sources, because they will perceive the banks’ reluctance to lend merely as a challenge to overcome. Other sources of funding may even be more appropriate, because some can bring additional commitment and proven commercial expertise.

Interestingly, among my local business community there is no issue around borrowing from banks, it's a message that you mainly hear in the media and from politicians – but why?

Historically we’ve been programmed to approach banks for finance. 2008 caused a paradigm shift and while those of us running our own businesses on the frontline are comfortable with this, the banks and politicians haven't caught up yet. There are two reasons – ego and economics. The banks and the City have always been thought of as the 'big boys' to whom us small firms should turn for support. They’re used to being in control – to dominating us.

However, 2008 showed that they aren't that great at managing their own businesses. Their validity to dominate has been undermined, but their ego has not been humbled yet. I’m not an economics expert, but I’d guess that the banks and the State are used to profiting from failing SMEs. Finding money from elsewhere takes away income from the 'big boys'. These are the real reasons for SMEs needing financing from the 'big boys' being in the headlines, it is their income streams that are being affected.

Our UK DNA as a nation of shopkeepers has prevailed and revealed its talent for resourcefulness and diversification. We don't need the 'big boys'. Question is – how long will it take them to adjust to their new relationship with us? Maybe we'll start asking for their investment once more when they’ve grown up and proved that they can run their businesses as well as they have expected us to run ours in the past.

Blog provided by Samantha Acton, who founded Domestic Angels in 2002, which provides home cleaning services across the Bournemouth, Poole and Christchurch areas.

Further reading

Why don't more people from ethnic minority backgrounds start businesses?

May 27, 2014 by Mark Williams

Why don’t more people from ethnic minority backgrounds start businesses?/ Young African Businessman{{}}The recent publication of A Portrait of Modern Britain had some commentators questioning the motivation of its publishers – right-wing think tank Policy Exchange, which was founded by current Tory ministers Michael Gove, Nick Boles and Francis Maude.

Policy Exchange called for all political parties to better understand and recognise the “clear and striking differences” between ethnic minorities and stop “lumping them together” or risk appealing to none.

One of the study’s headline claims was that the five largest “distinct Black and Minority Ethnic (BME) communities” (ie Indians, Pakistanis, Bangladeshis, Black Africans and Black Caribbeans) will double in size from 14% of the UK population (eight million people) to 20-30% by 2050.

Low start-up rate

According to A Portrait of Modern Britain: “Ethnic minority businesses [ie where at least half the management team is from an ethnic minority group – about 7% of UK SMEs] are already highly successful and contribute £25bn to the UK economy. There are higher aspirations to start-up amongst ethnic minority groups, especially Black African (35%) and Black Caribbean (18%) groups (compared with 10% for White British), but ‘conversion’ remains very low.”

So what do we know about UK BME businesses? According to Black Women Mean Business

  • 8% of SMEs that employ staff are owned/led by people from a BME background.
  • London accounts for 46% of all BME-led small businesses.
  • Retail is the sector in which most (35%) BME-led businesses operate.
  • BME businesses tend to be younger; 3% of BME-led SMEs are less than a year old (compared to 1% of all SMEs); just 24% of BME-led SMEs are more than 20 years old (compared to 40% of all SMEs).
  • BME businesses are likely to have a lower turnover than other SMEs.
  • More than half (58%) of BME SME employers are family-led businesses (compared to 62% of all SMEs).

Access to finance

So, why is the UK BME start-up rate so low? Last year, The Ethnic Minority Businesses and Access to Finance report, which was commissioned by Deputy Prime Minister Nick Clegg, concluded that “although the banking industry was working hard to ensure ethnic minority businesses have access to finance, there is more to be done to help under-represented groups”.

Clegg said that while there was no evidence that the challenges ethnic minority businesses face are due to racial discrimination, they still encounter problems accessing loans. “We know that 35% of individuals from Black African origin say they want to start a business, but only 6% actually do. Are they having problems accessing loans?” questioned Clegg. His friend, the Prime Minister, certainly seems to think so. Or at least he did in 2010 when he said black entrepreneurs were “four-times more likely to be denied a bank loan than white entrepreneurs”.

Unfair treatment

Race equality think tank Runnymede Trust welcomed the government’s review of access to finance for BME entrepreneurs and the UK banks agreeing to fund independent research into the experiences of BME businesses when seeking finance.

Dr Omar Khan, Runnymede Trust Head of Policy Research, commented: “Black and Asian businesses have long felt that they’re not treated fairly by lenders. We hope that government also engages in further initiatives to better understand why racial inequalities persist, not only to improve the lives of ethnic minorities, but also to grow the UK economy.”

Writing for The Voice in October last year, in an article called Want To Beat Racism? Start A Business, journalist Nels Abbey pondered possible reasons why more black people in the UK aren’t starting up. “In each of the home countries that black Britain’s lineage comes from, entrepreneurship is the norm,” he observed. “[Yet] for some strange reason, when black people arrive on these shores we seem to lose that entrepreneurial zeal and ingenuity. Not all of us. Just most of us.”

Black power

He puts this down to (perhaps) “a lack of confidence in our abilities in the face of more established business people”, as well as “actual and perceived racism maybe” and the “legacy of colonial structures”. Other possible reasons were “lack of resources, red tape, comfort, laziness even. Or maybe just a desire not to challenge the social order”.

Abbey concluded: “A single successful black business is worth more than any number of anti-racism demonstrations. A successful and respected business is a symbol of power and self-determination. You have to respect it, regardless of who runs it. Everyone loves a winner, no matter their colour.”

Blog written by Mark Williams, editor of the Start Up Donut.

Further reading 

Have you signed up for Growth Vouchers yet?

April 07, 2014 by Guest contributor

Have you signed up for government growth vouchers yet?{{}}At the beginning of the year, the government announced a 15-month, £30m small business growth scheme. Qualifying small businesses can register for up to £2,000 of funding support for:

  • finance and cashflow;
  • recruiting and developing staff;
  • improving leadership and management skills;
  • marketing, attracting and keeping customers;
  • making the most of digital technology.

Small businesses must match the government’s funding and those that are selected randomly must work with the Cabinet Office's Behavioural Insights Team, which has been tasked with finding out how the funding helps businesses that receive it. 

To qualify the small businesses must:

  • have 49 employees or fewer (including any employees of companies that own a stake in your business);
  • be registered in England;
  • have been trading for at least one year;
  • not have paid for business advice in the past three years;
  • be independent (ie no more than 25% is owned by other businesses or organisations).

The Prime Minister’s enterprise adviser, Lord Young, heads up the fund and principally it’s meant to help businesses conduct research before launching a new product or entering a new market. 

All services must be bought from approved advisers (there are more than 3,160 of them) through Enterprise Nation. As of 6 March 2014, Enterprise Nation reported that more than 1,400 businesses had applied for funding, and 598 vouchers had been allocated, with a value of more than £1m. Here’s the breakdown of the types of strategic advice small businesses have invested in so far:

  • 46% marketing, attracting and keeping customers;
  • 15% raising finance and managing cashflow;
  • 13% improving leadership and management skills;
  • 5% recruiting and developing staff;
  • 21% making the most of digital technology.

With the scheme due to run for 15 months, I’d advise small businesses to apply – but be aware that you have to pay fees upfront before reclaiming money from the government. Find out more about the scheme here

  • Blog provided by Scott Brown, accounting MD at Sable Group.

Further reading

Posted in Business planning | Tagged growth, Funding | 1 comment

Why Dragons’ Den rejection was no big deal for Alago Heated Gloves

April 03, 2014 by Guest contributor

Why Dragons’ Den rejection was no big deal for Alago Heated Gloves{{}}Mick Dickinson of BuzzedUp investigates how rejection on Dragons’ Den turned out to be a blessing for Tony Curtis, inventor of Alago Heated Gloves.

Slightly more than three years ago, Tony Curtis' business idea for heated sports gloves was given short shrift on TV's Dragons' Den. Those Dragons must be fuming now, because Alago Heated Gloves is a hugely successful business, with thousands of its products warming the hands of gardeners, cyclists, kayakers, tennis players, horse riders and players at many premier sports clubs. Stick that in your pipe and smoke it, Duncan Bannatyne.

Determination, bad luck and a radical approach to funding have all played a part in Tony’s remarkable business journey. Recalling how he came up with the idea, he says: "It started seven years ago when I was watching my 12-year-old son playing rugby. It was a freezing day and no one could catch the ball – no one wanted to. He ran off the pitch at the end with blue hands and shoved them up my jumper for warmth. Once I'd got over the shock I thought, he needs heated gloves.

Light bulb moment

"That was my ‘light bulb moment’. I searched online to try to find heated gloves but nothing was suitable. Everything I saw had big bulky battery packs, electric cables – useless for sport.

"So I thought I'd have a go at inventing something and spent six months playing around with gloves, silicon tubing, a meat syringe and some heat packs at home. After destroying several kitchen appliances along the way, I came up with something that I thought would work. I took it to a brilliant design company and we went forward to prototyping. That's when it started costing money."

So how did he cover those costs? "I had a day job, but needed more money. I didn't think about investment, I found another way. I bought a camera and taught myself photography. I opened up a spare-time photography business, doing portraits, weddings, event, etc. I did that for four years, that’s how I paid for product development."

What customers did he have when launching his business? Tony answers: "Our mitts were bought by junior and mini rugby clubs throughout the country. Gradually, our full-length gloves were picked up by professional clubs, then we got emails from salmon fishermen, helicopter pilots, classic car drivers, obstacle race runners – you name it."

Crucial moment

Was there a breakthrough moment? "We were asked onto Radio 4 for a five-minute interview with Liza Tarbuck. Within 30 minutes our website crashed due to demand,” Tony remembers. “Many people asked whether our gloves could be used for other purposes than just rugby, which was a crucial moment. Overnight we changed our website, product names, packaging – everything. We changed 'Rugby Mitts' to 'Classic Mitts', changed the descriptions, positioning, etc. Looking back, it was such an obvious thing to do - but we hadn't seen it."

What advice does Tony offer to those with a great business idea but no start-up capital? "It's all about paying for prototype manufacturing and product development. I needed money, so I went on Dragons' Den a few years ago, but they just didn't get it. Of course, now I look back and I'm glad I didn’t give up part ownership of my business in return for their investment.

“For years I had no luck with the banks or other lenders either, so I had to do something radical. I discovered that I could move my pension fund into a self-invested vehicle and invested that money into my business. This was a new idea then, and some told me it was risky, but if you think about it, your pension is already being invested in someone's business. Why not invest in your own business? It certainly keeps me focussed and motivated!"

Marketing advice

Tony says he now makes 95% of his sales through his website and the remainder through Amazon. “We don't advertise,” he adds. “When we launched our cycling gloves I bought cheap train tickets to major cities such as London, Newcastle and Manchester and spent days putting credit card-sized leaflets onto bicycles I came across in the street. I must have walked for hundreds of miles with a heavy backpack stuffed with leaflets. As a result, we sold three-quarters of our stock on pre-order before the product was even in our warehouse!"

Alago Heated Gloves has taken a standard product, adapted it intelligently to a niche requirement and delivered very high levels of customer service to make a successful business. It is currently partnering with the University of West England on some very smart (but ‘hush-hush’) new applications of its technology. Alago's innovations have already caught the attention of Lockheed, the British Army and a major car manufacturer, all of which have signed development deals.

  • Blog supplied by Mick Dickinson of Bristol-based SME digital marketing agency BuzzedUp. A version of this article was previously published on Bristol24-7.

Further reading

Crowdfunding models explained

February 13, 2014 by Guest contributor

Crowdfunding models explained/Funnel accumulates small drops into big one{{}}With all the hype surrounding crowdfunding, knowing what the different options are and which specific benefits they offer can seem difficult. To help you remember you can use the acronym DREIM, which stands for:

  • Donation (philanthropy)
  • Reward (“pre-tailing”)
  • Equity (shares)
  • Interest (debt) and
  • Mixed.

Donation

Of the five models, donation is perhaps the simplest to understand. Basically, it’s a form of philanthropy, whereby people give money to a good cause. Donors are left with the warm feeling that comes from knowing they’ve done something positive by funding a project with social value.

Within the arts, this has traditionally been represented by the concept of a sponsor or patron of an artist or field of creative work. There are many of these in crowdfunding, perhaps the most well known being JustGiving, but others include Spacehive, which is dedicated to social or community causes, and Unbound, a special model where authors ask the crowd for funding to help turn an idea into a published book.

Reward

This is the model that most comes to mind when people think about crowdfunding. The crowd pledges money to a project and gets something in return, such as a poster or item of merchandise. The reward model is represented well on both sides of the Atlantic by the likes of Kickstarter and Indiegogo, but there are plenty of UK sites, such as Bloom Venture Catalyst and Crowdfunder, and these support projects ranging from artists to zoos.

Equity

This is where the project’s management (could be a business owner) offers a share of the profits to the crowd. Once money is made or the project is sold, the investors get a share (well, that’s the idea). This is risky, because start-ups often fail, so the likes of Seedrs, which specialises in this model, requires would-be investors to pass a test before they can invest. But the good news for investors (and entrepreneurs using this model) is the government has introduced the SEIS (Seed Enterprise Investment Scheme) and EIS (Enterprise Investment Scheme), which offer tax breaks for investors. There are restrictions and the best place to learn more is by visiting the HMRC website.

Equity usually means giving away some control over a project or business, of course. This could be difficult for some people, which is why this model of crowdfunding needs careful consideration before you proceed. When you give away equity you will also need to seek legal advice, which costs money and takes time. Investors generally look for growth businesses they can scale up and sell in the future.

Interest

This model is similar to getting a bank loan except you get the loan from the crowd and it is on your terms rather than a banks. As with equity, you may find a lack of enthusiasm in your business unless you can prove its potential for major growth. Another problem could be higher rates of interest. The headline numbers might look the same as a high street bank, but you need to consider fees charged by the crowdfunding platform and the payment processor. This all adds up.

Mixed

Mixed is just as it sounds – a mix of models. For example, the Crowdbnk platform offers reward or equity, which is why careful consideration is advised before crowdfunding your project. Plus, you need to check the provider is FSA regulated (Crowdbnk is), which will ensure you are covered should they go bankrupt or if you find out a campaign is fraudulent.

Blog supplied by Chris Buckingham, lecturer and founder of crowdfunding research agency minivation.

Further reading

Deborah Meaden on how to fund a new business

December 19, 2013 by Guest contributor

What advice would I give to someone starting out in business who may be worried about funding? Today, I think people in need of funding and hoping to start a new business tend to approach the banks automatically, by default. Then, if they’re declined, the big question is – ‘What next?’

To those people, I would say that I think it’s never been a better, more exciting time to explore different avenues.

The difficulty with the banks and getting loans through conventional methods has meant other opportunities have had to appear through necessity. There are plenty of different models and lots of people actually looking to invest in new businesses – look at crowd funding, for example.

It can be worth considering friends and family, too, and approach them for investment, although you’ve got be careful that you’re very clear on the terms early on.

Which investment am I most proud of? I find it really difficult to pick a favourite investment. When I’m visiting a business or I have to be especially focused on one in particular it has 100% of my attention. It becomes all that I can think of, all that I can see and it becomes the one that I love the most. But when I walk out the door or shift my focus to another investment, that becomes the one I absolutely want to do.

I’ve got a portfolio of 19 businesses that I’m currently invested in. It’s been known to flux up to a maximum of 30 and down to ten.

There is one that I’m very pleased I got involved in and it was a cloth mill called Fox Brothers, which started in 1772. It was the last cloth mill left in the South West and it was dead – absolutely on its knees. I didn’t know that when I invested.

I’m pleased to say that now it’s doing well and I’m really proud to have been involved. I like to think that if I hadn’t found it, and it hadn’t found me, it would have died and a part of our heritage would’ve been lost.

This exclusive insight was taken from an interview conducted by cityindex.co.uk when Deborah recently participated in the city index celebrity trader challenge. Find out more about Deborah and her views by visiting her website.

Further reading

What are your key options after you've spent your initial start-up budget?

November 28, 2013 by Guest contributor

What are your key options after you've spent your initial start-up budget?/person with an empty wallet{{}}One of the earliest challenges faced by all start-ups concerns finance. No matter how great an idea you’ve had and no matter how well thought-out your business plan is, you’ll need to have enough funding to get your fledgling venture off of the ground.

Maybe you’ve pursued crowdfunding, borrowed money from friends and relatives, perhaps even turned to a high street bank for a business loan, or approached alternative finance providers for help. Whatever route you’ve chosen, before long you and your business will have to face the same daunting question – what to do when this money has run out?

You’ll hopefully be self-sufficient

Start-up funding is intended to give businesses a chance to get off the ground, of course. In the very earliest stages of a business’s life it’s almost guaranteed to be operating at a loss, and those expenses will need to be covered somehow.

You might need to invest in premises, staff, equipment and more besides, so start-up finance is a necessary step in order to see your business through those hard, frightening and exciting early months.

If all goes to plan, start-up funding should act as a stepping stone to help your business to become self-sufficient before the cash runs out completely. Very few start-ups operate at a profit for the first few years, but if you’ve played your cards right, you’ll be breaking even before your start-up funds are all spent.

You can actively pursue growth

It’s possible to pursue growth during the period when many fledgling firms find it difficult to compete, even when a challenging economy makes business opportunities difficult to come by.

Building momentum can be difficult at this stage, but if you’ve got the right people around you and have built a team of committed, hardworking individuals, it’s eminently possible to get moving in the right direction once more. Sometimes, however, it’s necessary to pursue another form of business finance if you are to move from stagnation to expansion once more.

You may need more financial assistance

The business world is built on finance, and until a business has reached the stage where it is sufficiently profitable to sustain itself and grow, it must rely on the assistance of small-business finance facilities instead.

Invoice finance providers offer facilities that can fund growth, based on your business’s internal sales ledger. Alternative lending options such as invoice finance and discounting are more flexible and thus more suitable for growing companies than traditional bank loans, so if you’re looking to move your business forwards without incurring additional debts, you’re likely to benefit significantly.

You could also look at peer-to-peer lending (ie the lending of money to unrelated individuals without going through a traditional financial intermediary), crowdfunding (ie the collective cooperation, attention and funding by people who pool their money and resources together to support other businesses or organisations) or possibly an overdraft.

The period immediately following your business’ first few months can be intimidating and confusing, and it may seem as though the last thing you want to do after your small business funding has all been spent is pursue yet more finance. Sometimes, however, it’s necessary to take the bull by the horns and actively pursue growth in order to spare your business from years spent merely treading water and making ends meet.

Blog provided by David Richards of Gener8 Finance Ltd.

Crowdfunding for business - a fad or the future?

November 11, 2013 by Guest contributor

Crowdfunding for business – a fad or the future?/Crowd, Funding road signs{{}}Financing a business has traditionally meant asking a few people for large sums of money. Crowdfunding – one of the most talked-about funding channels in recent years – turns this idea on its head by enabling businesses to use the Internet to ask a multitude of potential funders for defined, comparatively small amounts of money.

The question of how to fund and share profit more creatively was hotly debated at this year’s Dell Women’s Entrepreneur Network 2013 event. Speaking at a pre-conference workshop on accessing capital, Springboard Enterprises president Amy Millman stressed the importance of getting the right source of credit, suggesting that crowdsourcing can provide an innovative means of becoming a more social, community brand in opening a company up to a broader and younger pool of shareholders.

And with funding options drastically reduced in the wake of the global banking crisis, small businesses are jumping at the chance to get their finance from ordinary people: the crowd. But with little regulation, is this young credit market really a safe and viable option for businesses looking to meet their growth ambitions?

Crowdfunding essentially means asking a crowd of people for a fixed amount of money for a business venture or specific project in exchange for a reward. As a relatively new market, the credibility and stability of crowdfunding needs strengthening – something increased regulation will help bring about.

Currently, just a limited number of platforms are regulated by the Financial Conduct Authority, meaning many crowdfunding companies are handling transactions without adequate protection – even if the UK Crowdfunding Association has a practice code in place to protect those involved. Few sites can ensure an investor won’t lose money in the event of the platform collapsing.

Ensuring potential investors have as much information as possible about a start-up is essential for informed decisions. That’s why any business looking for funding via these channels must be totally clear about why they need the investment, how it will be used, and how much they need to reach their growth and profit targets.

Unlike traditional pitching, potential investors are unlikely to have met the start-up, so must be made to feel part of the success story. A company needs to tie-in their crowdsourcing outreach with a social and media engagement strategy. Of course, the nature of both social media and crowdfunding means that entrepreneurs must be ready to receive feedback – both the good and bad – in a very public domain.  

Ultimately, any business looking to raise funding through crowdfunding must do their due diligence before diving into these still largely untested waters. Not all crowdfunding platforms will be appropriate for the business or project in hand, so research is essential.

And it’s not for the faint-of-heart. It can be a lot of work to kick-start and maintain the momentum that will see a project through to its desired end. But crowdfunding can also provide a start-up with unique exposure and feedback from those who matter most – your target audience of ‘ordinary’ people.

Blog supplied by Sarah Shields, executive director and GM, consumer, small and medium enterprise, Dell UK.

Further reading

Peer-to-peer lending: a funding solution for your business

July 18, 2013 by Mark Shaw

Peer-to-peer lending: a funding solution for your business/twenty pound notes{{}}With many UK start-ups finding it difficult to fund a new business, there is an alternative lending option that is currently gaining a lot of press coverage in the press for all the right reasons.

Peer-to-peer lending is a relatively new form of finance (it was established in 2005) and (as of summer 2012) peer-to-peer lenders have since collectively lent £300m.

Peer-to-peer lending is as it sounds, lending money to ‘peers’, without having to go through traditional financial intermediaries such as banks or other institutions. Peer-to-Peer lenders are everyday people who have money they wish to lend out in return for a competitive rate of interest (usually between 6-12% pa).

Currently, these are unsecured personal loans that aren’t subject to regulation, but this will all change in April 2014, after which the Financial Conduct Authority (FCA) will regulate the peer-to-peer industry.

New small businesses are still finding it tough to get a traditional bank loan, as many UK banks are unwilling to underwrite an unproven, new business with no established credit.

This leaves many start-ups in a conundrum, but there are several alternative business funding options worth exploring. However, before making any financing decisions you need to carry out sufficient research so you can carefully weigh up the pros and cons of each option. Choosing a source could be one of the most important decisions you’ll ever make as a new business owner.

How to get a peer-to-peer loan

New business owners pitch their ideas online via peer-to-peer lending company websites to individuals interested in lending to small businesses. The peer-to-peer lending platforms make the process of introducing lenders and borrowers very simple and the platforms are often exclusively web-based. They take much of the administration away that borrowers experience with their high street bank.

As a borrower, you register with a company and you are then put into a category based on your credit score. When grouped, the lender can decide where they want to invest their money based on the risk and return. As with any loan there is a risk, however, the rate of an unsuccessful loan is far lower with peer-to-peer loans than applying for a bank loan.

One peer-to-peer lending platform that has grown significantly since it started in February 2013 is Cornwall-based Folk2Folk. It has introduced £11m of secured loans largely to the business community, starting from £25,000 and up to £1m, at interest rates typically of 7-9%.

Loans introduced so far have gone towards projects such as house building, commercial leisure facilities and property acquisitions, together with various renewable energy projects.

If you plan to start a business but lack funds, peer-to-peer lending might just provide the start-up funding you require. 

The future of business funding?

March 28, 2013 by Graham Tripp

The future of business funding?/invoices{{}}Invoice finance benefits small businesses by: allowing business growth; protecting cashflow, because late payments and increased credit terms are no longer an issue; providing an alternative to overdrafts and loans that can be difficult to secure at appropriate levels.

This can be seen with two of the fastest-growing industries using invoice finance today. The construction industry has enjoyed an increase of 138% for construction businesses taking up invoice finance from 2007 to 2012, particularly affecting small builders' firms who find it most difficult to secure an overdraft at the levels they need. The manufacturing industry has seen a similar increase in adopters of invoice finance, with an increase of 120% from 2007 to 2012. So why are these industries choosing to take invoice finance as their funding solution?

Invoice finance is flexible; it requires little collateral and takes into account that customers do not always pay invoices on the date of the invoice’s creation. These are especially pertinent reasons for the construction industry, because these businesses are often paid 60 to 90 days after the job is complete.

Invoice finance provides them with a cash advance of any invoices created. By allowing the business to fund projects with the money they would have previously only secured once the job is complete, they can now pay costs such as wages and purchase raw materials, which are required throughout a project’s lifetime.

Banks are unwilling to lend to what is often seen as a risky industry for late and non-payments. This is probably due to construction projects being easily halted by problems such as bad weather, or simply because the job has not been finished to the customer’s satisfaction. These problems can be seriously harmful to cashflow, because the banks are looking predominantly at historical financial data to assess whether a business (particularly a small business or startup) is worth lending to.

Construction businesses that are turning a corner and are in fact profitable, have responded to this by seeking out alternative forms of finance – invoice finance, where funding is judged on the future income of a business rather than its historical records.

Two other extremely popular adopters of invoice finance, according to data from Touch Financial, are recruitment businesses and those in wholesale and distribution. Wholesale and distribution often suffer from late payments, and the nature of the wholesale business means they need a quick stock turnaround in order to maximise income and profits. In no other industry does time mean money more than in wholesale, and invoice finance allows protection against late payment, while strengthening cashflow to allow the purchase of further stock as quickly as possible. This gives the safety and flexibility smaller businesses benefit from the most.

Recruitment is a sector where invoice finance also appears to be thriving. Contractors often require payment before the customers settle their bills and invoice finance provides the working capital to achieve this. Recruitment companies often have few high-value assets, which makes securing a bank loan or overdraft difficult, particularly earlier on in the business’s life. Invoice finance provides cash you are to receive in the future through the invoices you generate today and usually requires little other assets to secure - something an overdraft cannot provide.

Late payments, poor credit history and a lack of assets are all common reasons for small businesses being unable to grow to their full potential. 2013 is likely to see a further increase in the amount of construction and manufacturing sector businesses moving towards invoice finance, while wholesale/distribution and recruitment SMEs should continue to benefit from the flexible funding that invoice finance has provided them throughout the years.

Written by GrahamTripp on behalf of invoice finance provider Touch Financial

Do we really need another bank?

March 25, 2013 by Darren Fell

Do we really need another bank?/Vince Cable{{}}Last year, Business Secretary Vince Cable floated the idea of a new business bank, a financial institution whose raison d'être would be to support the UK’s freelancers, contractors and small businesses. 

Time after time, official figures prove it’s SMEs that are driving the UK’s recovery, so it only makes sense to support them in every way possible, while the wider economy lumbers back to its feet.

The main function of the business bank will be to help small enterprises raise funds and give them access to credit - something the high street banks are still monumentally failing to do.

There is a fundamental problem with Cable’s proposition, however. Back in September he promised £1bn in funding, plus a matching contribution from the private sector. Hang on a minute, you’re probably thinking, won’t those private sector contributors be the same institutions currently denying credit to small businesses up and down the high street? Quite possibly, yes.

If this new bank is to have private sector involvement, there is a danger the same risk-averse attitude the big banks have adopted will find its way into this organisation, rendering the whole exercise pointless.

As well as being easily accessible, any loans offered by the business bank must be available fast. I have seen many businesses disappear while waiting for loans to make their way through the maze of bureaucracy that blights most financial institutions.

Set up a scheme that allows access to funds within 30 days, guaranteed. Not only would this allow businesses to start up faster, it would allow owners to plan their spending accordingly, with a guarantee that funds will reach them by a certain date.

The government desperately needs to avoid another costly and under-subscribed business stimulus initiative. Past failures such as National Insurance holidays, and more recently the Funding for Lending scheme, will hopefully have given the Department for Business, Innovation & Skills a feel for what works and what doesn’t.

Details are still fairly sparse as to what form the business bank will eventually take, but with a bit of luck Vince Cable will listen to business owners and put together a sensible and useful establishment - and not one that exists solely to turn a profit for its commercial backers.

Written by Darren Fell, managing director of Crunch Accounting.

Posted in Financing a business | Tagged Funding | 2 comments

Funding options for start-ups

January 21, 2013 by Erin Walls

Funding options for start ups/hands shake{{}}The business plan is going well, your idea seems to have feet but you face a major problem. You need money to get your new business off the ground.

Securing funding is one of the most common start-up problems. There are various ways to raise finance, which is a good thing, but many people are unaware of all of the options available to them or are unsure about how they work. Do your research to find out how you can raise the funds you need in a way that best suits your business. Here are the pros and cons of some key start-up funding options.

Banks and building societies

  • Amounts: Various depending on size of business and situation
  • What is this: Application for a loan submitted to the bank, which then decides if it will lend you the money
  • Pros: Tried and tested method with (usually) very transparent terms and conditions
  • Cons: These days, vey hard to secure, financials and a good credit history required
  • Tax incentives: No

Venture capital trusts

  • Amounts: £200,000 per annum to qualify for Relief
  • What is this:  Invest indirectly in a range of small higher risk companies whose shares and securities are not listed on a recognised stock exchange.
  • Pros: There are VCT companies out there looking for companies to invest in and it is a tried and tested method offering the incentive of tax reliefs to potential investors
  • Cons: Must be approved by HMRC and there are various conditions that have to be met
  • Tax incentives: Yes -   no tax on dividends from VCTs, income tax relief of 30% of amount invested; capital gains relief  (very brief summary; there are rules & qualifications to note)

Crowd funding and peer-to-peer lending

  • Amounts: Usually from £5,000 to 250,000 but can be for larger amounts
  • What is this: Individuals or companies can put in their funds in return for a share of equity in your business
  • Pros: Removes the risk of having one main investor, also the individuals investing may act as advocates and supporters of the business
  • Cons: More admin involved, as more investors to communicate with
  • Examples: Banktothefuture.com, Crowdcube, funding circle, Seedrs and Kickstarter, Zopa
  • Tax incentives: Many of the projects may qualify for EIS or Seed EIS schemes and entrepreneurs’ relief

Business Angels

  • Amounts: Various depending on the project and the Angel but usually below £500,000
  • What is this: You offer shares in your company for money from an Angel(s)
  • Pros: It can be a cheaper method and you could find an Angel with expertise in your industry who may add value as well as a  cash injection. They are likely to be much more ‘hands-on’
  • Cons: Depending on the funds you require you may end up giving up a significant share of your business, which can cause issues with control and strategy. You may not want a hands-on approach from your investor
  • Examples: Angel CoFund, Angelsden
  • Tax incentives: Possible qualification for EIS, Seed EIS and Entrepreneurs relief

Grants

  • Amounts: Various depending on type of project – industry and political agendas
  • What is this: Government bodies and charity groups or industry bodies reserve funds for specific grants which individuals or businesses can apply for; usually focused around innovation, energy saving and job creation.
  • Pros: Possible to obtain resources or funding at nil cost
  • Cons: Hard to find, process and conditions can be complex and confusing
  • Tax incentives: Depends on the type of grant

By Erin Walls of Ward Williams Chartered Accountants 

Getting business funding when times are hard

November 21, 2012 by Kimberley de Jong

Getting business funding when times are hard/tap with pound sign as water{{}}At a time when money is tight and resources are dwindling, it might be difficult for start-ups and small businesses to locate the funds they need to thrive and expand. It’s a disheartening situation for those that want to get and keep their businesses on the right track. But even in such times, there are still many institutions, organisations and individuals willing to finance small businesses, from banks to businesses, government bodies and the EU. Impossible? Not quite!

1. There are grants and funding opportunities out there

There might be grants you could qualify for that you never even knew about. Although you might think that having a small shop in a rural area would not be significant enough to secure grant funding, you could be an excellent candidate for a regeneration grant – the opportunities are out there, you just have to find them! For example, have you considered that funding programmes like the ‘Rural Shop Improvement Scheme’ exist? You might not know about the many grants and funding opportunities you could apply for, but dedicated funding websites provide a free searchable database of small business funding opportunities.  

2. Don’t be afraid to apply

Although you might have heard that grants are difficult to secure, they are worth trying for. Nothing ventured, nothing gained. If you are passionate about your business and think you have a great reason to secure grant funding, you only need to translate your enthusiasm onto paper. Effort is required, but it might be more than worth it. Moreover, there are resources out there to help you write your grant funding applications, and review them. Free resources exist online to help you with your grant applications, like j4bGrants 10 Steps to Successful Grant Applications. There are also special services whereby funding professionals will take a critical look at your proposal and help you write the best possible application you could submit.

3. Stay positive

The fact that so many funding opportunities exist in the midst of a recession means you have as good a chance as any other business of getting the boost you need. Grant funding could provide you with amazing benefits, whether you are an established business or just starting out.

Searching for grants might be time-intensive, but luckily free resources exist to help busy business owners locate funding quicker and more effectively. j4bGrants.co.uk has been re-launched with a new-look website featuring thousands of opportunities for business funding. The site is completely free following registration, and allows you to search by business type, size or location, providing access to information that is constantly updated by a team of researchers who do the time-intensive searching for you. The opportunities are out there – you just have to find them!

Introducing the government’s new bank scheme - free gift and all!

October 08, 2012 by Guest contributor

Introducing the government’s new bank scheme – free gift and all/50pound bank notes{{}}With the reduction in small business loans offered through high street banks in these times, news of a possible Coalition scheme to offer start-ups the financial break they need, may sound like a bonus to many bank managers.

Hopefully, the Tory business bank will be offering nice promotional gifts like high street branches of Lloyds, Halifax or TSB have to incentivise the customer. At the very least they could hand a silvery pen out of it as they sign your business up for more of the government’s borrowed money from the IMF.

Chancellor George Osborne’s claim that it is "all the alphabet soup of existing schemes” should spell “the Tory way of tidying away bitterly disappointing incentives one to one giant kid’s meal, the kind that lacks XYZ of investment capital for genuine high-street money lenders at a time when the UK economy is in recession, without beans”.

The UK economy has statistically been suffering under the weather from a cloud of uncertainty forecasted by the so-called ‘big-four’ high-street Banks. A sector-based approach is a new way in which the Tories can withhold currency and lending to the banks, while having a stronghold in the business investment market and sell assets to small businesses and provide them the breakthrough that has been waiting in the wind.

Ahead of the speech, at Imperial College, London, Cable said that there was a "real shortage" of the "long-term patient capital" needed by businesses to grow. Larger businesses were "by and large" capable of raising short- and long-term finance via capital and equity markets. Meanwhile, the latest SME Finance Monitor showed that in the last 12 months, 33% of businesses that applied for loans were rejected.

Maybe it is along the path but this is still only in initial talks, meaning that the government need to open a tin of beans on-cue and finalise on its structure and offering to selected sectors, choose smaller ‘challenger’ banks and non-bank sources to take on the so-called ‘big-four’ and perform more like a business.

When Vince Cable addressed the public, the follow up indicated that it could shop around to find the tin. Smaller banking providers such as the Co-op, German lender Handelsbanken and Aldermore, are all contenders. By and large Aldermore sound like front-runners. In March, they announced their intended participation in the Government's National Loan Guarantee Scheme (NGLS) providing small businesses to borrow at a lower rate. The partnership would, Cable said, boost these smaller banks' lending capacity as well as round up existing co-investment and guarantee schemes.

Hopefully, this would lead to relief from this financial gasp and finally you start-ups out there will have the power to fulfil your destiny and have the financial backing you needs.

How to raise money for your small business in a tough economy

October 05, 2012 by John Davis

How to raise money for your small business in a tough economy/man with empty pockets{{}}Recession continues to provide the backdrop for the UK economy, directly impacting the financial health of small businesses. Research shows that small businesses are more in debt now than at any time since the late 1990s. Those with a turnover of up to £1 million now owe around £1.60 for every £1 of turnover, compared with £1.17 debt per £1 of turnover ten years ago. Furthermore, the most recent figures from the Bank of England show that in the three months to May 2012, the total lending stock shrank by £3bn.

The credit crunch and recession has made securing finance tougher for small businesses, but that doesn’t mean that raising money is impossible. Banks, investors and business angels are always open to the suggestion of backing well-run businesses with a strong sense of direction and good management team.

How to prepare for funding success:

  • Write a well-constructed, comprehensive business plan. Begin by formulating your objectives clearly in your mind, and then translate them into a document that will engage investors.
  • Prepare realistic financial projections. The three most important measures potential lenders will want to discuss are: profit and loss statement, cash flow forecast and balance sheet.
  • Maintain a healthy credit score to achieve low interest rates on any loans that you successfully secure. Be savvy with your budget and do not extend credit terms to customers unless you are confident they can pay your invoices on time.

Funding options to consider:

  • Form strategic partnerships – be creative and look for business partners. Forging mutually beneficial relationships can open lots of doors and requires little or no funding.
  • Join the information superhighway – the internet has become the fastest and most efficient means by which a new business owner can research funding options and eligibility criteria.
  • Investigate equity financing – selling a share of ownership of your business to a venture capitalist or angel investor. A good option if you are seeking a loan that can be re-paid over time as your venture becomes profitable, but not suitable if you aren’t prepared to lose autonomy over your business.
  • Turn to friends and family – one option to raise capital quickly and without lots of red tape, although be prepared for the interested parties to desire input in every company decision!

The overall message to take away is this: whether you’re looking to acquire additional capital or fund the launch of a new company, do not give up! Achieving investment requires a little creativity and a lot of perseverance and determination, so set realistic goals and be prepared to explore several options.  

BCSG creates, distributes and supports value adding products and services to small businesses through financial institutions.

Start-up funding advice

June 23, 2010 by Sadie Hopkins

Starting your first business can be a daunting task and raising finance can often seem impossible. So what are your main options?

1 Savings and self-finance

Start putting money aside soon as you can. If your long-term aim is to start a business, cut down on your spending and save as much as you can from your current wages. I moved in with my parents, paid a much lower rent and saved hard to ensure I had as much money as possible before starting my first business.

Cash in any ISA’s or savings accounts. If your business is successful, you may get a much greater return on your money than you currently get, with interest rates as low as they are.

2 Loans

If you have no capital, it is difficult to get finance, especially post credit crunch and with no trading history. Banks require a detailed business plan, preferably with three years projected forecasting and profit/loss models.

However, as interest rates are currently low, a business loan can be a reasonably cheap to borrow. The new Enterprise Finance Guarantee (which has replaced the Small Firms Loan Guarantee Scheme) is useful for start-ups with no capital. Under the scheme, the Government guarantees 75 per cent of the loan should the business be unsuccessful. The EFG is available for businesses with a turnover of less than £25m and offers loans up to £1m. If you borrow under this scheme, you will have to pay a set-up fee, plus a quarterly fee for the borrowing.

Shop around for the best deal on any bank loans – interest rates can vary dramatically. With my original business loan, I naively accepted the first one I was offered (at an extortionate rate) as I was convinced I would not be offered another. Six months later I approached a second bank and moved it, saving me 5 per cent interest.

3 Investors – family and friends

It can be worth approaching family and friends to see if they will invest in your new venture.  Discuss various levels of involvement; some may expect a share of your profits, while not wanting involvement in the running of the business (a silent partner). Others may be happy to lend long term, receiving only interest payments, as does one of my investors.

Whatever the situation, always make sure both parties take independent legal advice and draw up an agreement outlining the terms. This prevents any potential problems if the future relationship breaks down.

4 Investors – business angels or venture capitalists?

Look for financial involvement from established business people, either in the form of a business angel (ie a local businessperson who lends money to businesses) or a private equity provider (ie usually more suitable for larger businesses with higher turnovers). Both can provide a wealth of information and assistance, especially if they have relevant contacts. In return, they will expect a share of profits and possibly a share of the equity.

Be cautious about giving away too much control over your business. You must also find an investor that is right for you and the business – having a good working relationship is a must. If you feel this is unachievable, don’t take the risk.

5 Grants

Whilst notoriously difficult to gain Government or EU funded grants, it’s worth making enquiries in your local area to see if you are eligible for help. The EU has a wealth of grants available, especially in rural areas, but they are badly advertised and difficult to access.

The Princes Trust is useful to young people starting up a small business, but the loans offered are fairly small and the criteria strict – although they are helpful for people from disadvantaged backgrounds.

If you are restoring an older property as part of your business, see if you are eligible for support from the local council, English Heritage or local conservation trusts.

6 Reducing Costs

It pays to keep your start-up costs as low as possible, of course. You could get equipment on hire purchase or loan or use a ‘rent a desk’ scheme, for example.

Utilise your friends and acquaintances – perhaps you know designers, IT professionals or PR experts? Set up a social networking account (eg Twitter) and find others in your area who are setting up businesses – perhaps you can exchange skills. I’ve done this many times – exchanging free coffee for help with my website.

7 Don’t put all your eggs in one basket

Share the risk when starting up. Spread the borrowing and the repayment terms. This will make everyone – including you – feel less vulnerable.

Sadie Hopkins is founder of York Coffee Emporium

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