One of the biggest challenges facing many a young entrepreneur and small business owner is getting the funding needed to turn their vision into reality. After all, with no – or at least limited – financial history it may seem there’s little point even applying for a traditional business loan. But, if you’re just starting out, don’t lose heart. There are a number of funding options available to young entrepreneurs.
Grants and loans exclusively for young entrepreneurs
For starters, there are business grants and small business loans available exclusively to young entrepreneurs and businesspeople. One of the best known of these is the Prince’s Trust Enterprise Charity Programme, which has distributed more than £5 million in funding since 2010.
The programme allows young entrepreneurs to apply for a business loan of up to £7,500, so long as they’re between 18-30 years and not in full-time education. You get to repay this amount on favourable terms and the Prince’s Trust provides successful candidates with access to a business mentor for two years. The Trust also offers small business grants to young entrepreneurs in certain circumstances.
UnLtd is a network which provides financial and business support to young social entrepreneurs. So if your idea is aimed at making the world a better place, you may be eligible for a grant, award or business loan. Even if you are studying full-time you are still eligible to apply, but you need to be under 21.
Alternatively, if you’ve got an idea that’s addressing sustainable living challenges another option potentially available to you is Shell Livewire, a private initiative of the Shell company. The scheme provides a start up grant of up to £5,000, as well as ongoing mentorship and is open to young entrepreneurs aged between 16 and 30.
Other small business grants and loans
On top of that, there are a number of more general new and small business grants and loans that are also available to young entrepreneurs. The government run New Enterprise Allowance Scheme gives entrepreneurs a weekly allowance of up to £1,276 for 26 weeks. You can also apply for a loan to help with start up costs which you can pay back over 5 years. To be eligible you need to be receiving the Jobseeker’s Allowance, Employment and Support allowance or Income Support.
There’s also the UK government’s Start Up Loan Company, which lets new businesses borrow up to £25,000 pounds at a fixed rate of 6 percent. You get a year off repayments to help you build the business, and then have between 1-5 years to pay back the loan.
Another form of funding that many young entrepreneurs are turning to is crowdfunding. Instead of getting funding from just one source, crowdfunding lets a lot of investors spread the risk of investing in a start up or small business by contributing just a small amount each.
There are two main types of crowdfunding which may be helpful to young entrepreneurs: debt crowdfunding – which pulls together people to contribute to a loan – and equity crowdfunding – which lets you raise money by offering a stake in your business in return for investment. You can read more about crowdfunding here.
Traditional funding avenues
Finally, just because you’re a young entrepreneur doesn’t mean you should give up all hope of obtaining funding through a traditional bank loan. Many financial institutions may still loan you money, especially if you have a relative or close friend who’s willing to guarantee the loan.
Speaking of which, you may also find that someone close to you is prepared to invest in your business. After all, according to Entrepreneur Magazine, more than 38 percent of start ups still receive private funding from family and friends.
Being a young entrepreneur isn’t always easy but there’s no excuse for letting a lack of funding get in the way of achieving your business goals.
For more information on funding solutions for young entrepreneurs, check out our guide to small business funding.