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Generating finance to start a new business can seem a mountainous task. Fortunately, in the UK, plenty of funding options are available for startups and small businesses. Entrepreneurs will likely need to explore multiple funding sources to turn their ideas into reality. This article will explain business support schemes, their advantages and disadvantages, and alternative financing options.
What Are Business Support Schemes?
Business support schemes are a number of government-backed schemes offered to businesses seeking financial support. Most of the schemes involve grants. Business grants are non-repayable funds for businesses that meet specific criteria. The government or an associated organisation will award a business grant to fund specific activities, such as research and development or improving sustainability.
A smaller portion of the government-backed schemes involve either equity or debt financing. Equity financing allows businesses to raise funds in exchange for a share of ownership in their company.
Alternatively, loans are an excellent option for businesses that require a specific amount of money they can pay back over time with interest. Some schemes, however, do not involve funding. Instead, they are opportunities for free business-related advice and support.
How Can Startups Find a Suitable Support Scheme?
There are many schemes available, and they all have specific eligibility requirements. The government’s website is a good starting point. The website has a ‘business finance and support finder,’ which is a database where you can search for support that meets your needs. You must ensure that you meet the eligibility requirements before applying.
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Advantages and Disadvantages of Business Support Schemes
The schemes typically provide support for business expansion and innovation. They can help founders and small business owners improve and expand their existing businesses.
Additionally, many of the available business support schemes involve grants. A great benefit of grants is that business owners do not need to repay them or give equity in exchange.
On the other hand, the schemes tend to have strict eligibility requirements. Many require that:
- you live in a particular area;
- your business is a certain age;
- you operate in a particular industry; or
- you need funding for a specific purpose.
Moreover, most applications for these schemes are lengthy, and it may take a while for applicants to hear back. The waiting time makes this form of funding unsuitable for those who need a quick cash injection. If you successfully apply for a government-backed scheme or grant, you can receive anywhere from a few hundred to a few thousand pounds. If you require more than this, you must also seek funding elsewhere.
Alternative Sources of Startup Funding
You may require further funding sources even if you can access a business support scheme. Additional sources of funding may include:
- business loans;
- angel investors;
- venture capital; and
- crowdfunding.
In terms of government support, government-backed startup loans of up to £25,000 are also available. Ensure that you thoroughly research and understand the implications of any form of funding before accepting it. Some forms of financing, such as angel investment and venture capital, will require you to give up a portion of ownership in your company, and funders may expect rapid growth.
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Key Takeaways
Business support schemes are government-backed sources of funding. Government-backed funding may allow new enterprises to invest in research and development, hire staff, purchase inventory, and expand their operations. An advantage of successfully obtaining a business grant is that you will not need to repay it and can invest it directly into your business. A disadvantage is that they can be challenging to obtain due to the strict eligibility requirements, and if successful, you can only use the money for a particular purpose. Ultimately, you should ensure that you thoroughly research and understand your financing options before committing.
If you need legal assistance obtaining funding for your business, our experienced startup lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.
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