Sources of investment when you’re going it alone

By Jake Martin

3 min read

If you’re a solopreneur looking to grow your business, there are several investment solutions – from start up business grants to crowdfunding websites.

 

If you’re a solopreneur looking to expand, it’s likely you’ll need some form of new business funding. There are a range of business finance solutions available to the self employed and small business owners – here’s what you need to know.

 

  1. Crowdfunding websites

Instead of asking one person for a lot of money, crowdfunding – as the name implies – allows new businesses to secure funding by asking many people to contribute a small amount. That way, early stage businesses that don’t have access to traditional lenders still get the opportunity to obtain business finance. Meanwhile, investors with only a small amount of money are able to invest in innovative startups – just like an angel investor or venture capitalist – while sharing the risk.

There are generally three types of crowdfunding websites:

  • Donation crowdfunding,where investors give money to a business or cause they believe in, without receiving anything in return.
  • Debt crowdfunding, sometimes called peer-to-peer lending or lend-to-save, which requires investors to pool together to provide a start-up loan to a business. In return, investors get their money back plus interest.
  • Equity crowdfunding, where people give money to a business in exchange for shares.

There has been remarkable growth in the number of UK-based crowdfunding websites in recent years. As of September 2015, more than 40 equity crowdfunding websites were operating in the UK and had raised more than one million pounds, according to the UK Crowdfunding Association. It’s worth noting that equity crowdfunding sites are off limits to solopreneurs not operating within a company structure, however debt crowdfunding remains a viable option.

  1. Start-up business loans

The UK government’s Start Up Loan Company lets new businesses borrow up to £25,000 at a fixed rate of 6 per cent, which they can pay back over over five years. To be eligible you must have a business idea, both you and your business need to be based in the UK, and you must have been operating for less than two years.

While the interest rate may be a little higher than usual, one of the main benefits of this approach is that you get a 12-month ‘repayment holiday’ at the start of the loan. You also have the opportunity to receive free business advice from an assigned mentor.

The government isn’t your only investment option for a start-up business loan. The Prince’s Trust offers business loans of up to £4000 pounds for entrepreneurs aged 18-30, as well as business support and mentoring. Repayments are spread over two to five years. Meanwhile, many private lenders will also loan money to solopreneurs, particularly when the loan is secured by a home or other asset.

  1. Start-up business grants

Another business funding solution may be to obtain a start-up business grant. Start-up grants will often be tied to one aspect of the business, such as employment and training or capital investment. Unlike loans, small business grants usually don’t need to be paid back, so long as you meet the conditions of payment. However, they often require the business to contribute funding too.

Many start-up business grants are region-specific. For instance, Local Enterprise Partnerships – of which there are 39 across England – are partnerships between local government and a business. Meanwhile, most local governments across the UK have grant schemes for businesses available to solopreneurs.

So there you have it. There are a number of business investment solutions that self-employed people can access without needing to take out a company structure and give away equity.

 

For more information on start-up business finance solutions, check out our guide to 4 alternatives to traditional bank finance.

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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