To grow and develop into a fully fledged business, startups will often require a reliable source of funding. This will typically be from an external source, such as a bank or an investor. Luckily, accountants for startups can help them to get the funding they need. In this guide, you can discover how startups can help secure funding with the support of professional accountants like Oasis Accountants.
What are Startups?
A business startup is a newly formed company aiming to offer a new product or service. These companies are typically made up of only one or two entrepreneurs with limited resources. To cope with the high costs associated with growing and developing, these companies will likely be looking for funding from external sources.
Types of Funding for Startups
Startups seeking funding have a wide range of options available, each with its own benefits, requirements, and potential challenges. Whether you’re launching a new business or scaling an existing venture, securing the right type of funding is crucial for long-term success. In this section, we will explore some of the different types of funding available to startups.
Government Loans
Typically for businesses that have been in operation for less than 24 months, startup loans are a potential option for funding. Each of the partners in a business can apply for a startup loan, helping them to separately source the amount they collectively need.
With a government-backed startup loan, you could get:
- Up to £25,000
- 1-5 years to repay the loan
- 12 months of free mentoring
- A fixed interest rate of 6% per year
Angel Investors
For startups with high growth potential, angel investors are often a suitable option. As wealthy individuals, these investors will offer funds in exchange for equity. Additionally, they may offer mentorship and industry connections. This option has the benefit of no repayment, however, you will have to give away business ownership.
Venture Capital Funding
Another popular option of funding for startups is venture capital funding, also known as VC funding. This is when large venture capital firms will invest significant amounts in a startup, usually in exchange for significant equity. These are typically suited for startups looking for rapid scaling. While this option is suited to taking care of financial needs, there will be a loss of ownership to consider.
The Challenges of Sourcing Funding
Funding is important to startups, helping them to successfully grow into flourishing businesses. Below, you can discover the challenges you may face when attempting to source funding for your startup.
Building Investor Trust
One of the challenges you may face when sourcing funding for your startup is building trust between you and a potential investor. An investor could be put at risk by making a bad investment decision, therefore you will need to prove to them that your idea is worth it. Unfortunately, this can be a daunting process, especially if this is your first time seeking funding for a startup.
Equity vs. Debt Dilemma
When deciding which funding option you would like to opt for, you will need to decide between debt and equity options. You will need to decide whether you would rather have a significant payment amount or less ownership in your business, which is not often an easy decision to make.
Strict Investor Criteria
Many investors and parties offering loans will have a strict set of criteria that must be met before they will provide funding. These criteria often encompass various factors, such as the financial health of the business, projected revenue growth, industry stability, and the experience of the leadership team. The high bar that is often set can act as a barrier for new companies, preventing them from getting the funding that they need.
Overcoming Funding Challenges
While the listed challenges can be difficult for companies, there are some ways to help overcome them. From making a careful plan to exploring your other options for funding, funding challenges don’t need to prevent your startup from succeeding. Below, find three tips to help you overcome funding challenges.
Develop a Plan
Before an investor will offer the needed money, they will often want to see a clear business plan first. This helps them to decide whether your startup is a worthwhile investment. A well-structured business plan will typically include your expected expenses and how your company will start to make money. This can help you show investors how your business meets certain criteria, and why it would make a beneficial investment opportunity for them.
Explore Other Funding Options
If you’re not eligible for one funding option, there are likely to be other options available to you and your business startup. There is a diverse range of funding options, so by exploring all the options on offer, you can likely find a funding source that will work for your needs.
Work with an Accountant
Startup accountants are on hand to help startups grow and develop effectively, including helping them create a business plan and suggesting alternative funding sources. Accountants can help you properly understand your startup’s financial situation, and help you to keep accurate records.
Why Choose Business Startup Accountants
Alongside helping you to source funding, there are plenty of other benefits to choosing business startups for accountants. Discover some of them below, from specialist knowledge to money management expertise.
Expertise
As specialists in business startups, startup accountants are fantastic for offering tailored advice. Knowledgeable about how new businesses operate, business startup accountants are aware of key challenges that startups can face and therefore help their clients overcome them as smoothly as possible.
Cash Flow and Budgeting Support
Managing money and resources can be challenging for a very small business, so having the support of an experienced accountant can help. These experts will help you effectively manage and stretch your finances, meaning you have the right amount of funds at the right time.
Tax Compliance
Tax compliance is incredibly important for any business, whether large or small. Tax advice for businesses from accountants can help to ensure a company is adhering to local regulations, and making sure that the correct amount is being paid.
Scaling Support
As your business grows and develops, you will need an accountant that can grow with you. Startup accountants can help you manage your small business as it shifts and changes into a large one with multiple employees.
Business Startup Accountants in London
At Oasis Accountants, we are committed to helping talented entrepreneurs bring their startups to life. Our professional business startup accountants can offer you and your startup business support, from making sure you’re fully tax-compliant to helping you manage your resources most effectively.
Ready to help your startup grow? Please visit the Oasis Accountants website to learn more about us and the various business accounting solutions we offer. Alternatively, contact us directly for any further information or support.
