Our Passion Pioneers campaign is all about empowering you to take control of your future, with securing your funding being the first step.
Your freelance work, side hustle or passion project could become its own business – but how do you finance it?
As part of Fashion’s DIgest UK’s Passion Pioneers campaign, in partnership with entrepreneur platform GoDaddy, we’ve outlined a number of ways to fund your business.
Think of it as your go-to guide for understanding funding, because it’s so important to take care of your financial wellbeing. From personal loans and crowdfunding to venture capital, all that’s left to do is decide which one is right for you and your business idea.
How to fund your business…
1. Crowdfunding
Crowdfunding is a type of investment where the general public donates to help raise funds for your specific need, often in exchange for rewards and recognition. Everyone’s heard of GoFundMe, right?
Pros:
It’s free and is a great way of raising finance without access to traditional forms of bank lending (read: accumulating debt).
Cons:
It can take a long time to hit your target, and if you’re relying on crowdfunding you can suffer legal consequences for under delivering on business promises (having a contingency plan in place can help avoid angry donors and legal action).
2. Venture capitalists
These are investors who offer a considerable amount of money in exchange for equity in the business. Often their objective is to help the business grow quickly, so that they can realise a good return on investment in a short time frame.
Pros:
If you’re a start-up with high growth potential and don’t mind giving up some equity, venture capital funding is a good route to secure funding. In addition, venture capitalists can offer expertise to help develop the business.
Cons:
These investors typically get a say in company decisions. You’re likely to have to give up a large proportion of your business, because of the significant amount of funding provided.
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3. Bank loans
Traditional bank loans and overdrafts are still a popular source of funding for many businesses. Used properly, they provide a simple and effective way of financing the growth of your business.
Pros:
Some banks offer low interest rates, depending on your credit score, and you won’t have to give up any control over your business.
Cons:
The process of getting bank finance can be long and time-consuming. As well as this, make sure you do your research on the various types of loans, the terms and the interest rates that come with each option.
4. Family and friends
Family and friends who believe in your idea can fund your business and offer advantageous and straightforward repayment terms.
Pros:
You could offer them stock in your company and pay them back with or without interest. Plus, you have a ready-made support network.
Cons:
They may lack investing experience and be unable to advise. And unlike venture capitalists, there is limited money available. Finally, buying into the same investment can risk damaged relationships.
For more on the campaign, which aims to empower women to take that next step in turning their passion into a viable business, head over to marieclaire.co.uk/passionpioneers.