Entrepreneurs seeking funding for their ventures have a range of alternative finance options available, from angel investors to government-backed schemes. One such scheme is the Seed Enterprise Investment Scheme (SEIS), which offers tax relief to investors who back eligible start-ups.
For those looking to bootstrap their business and then seek investment, choosing the right investor is essential. Michael Elias and Hillel Zidel of Kennet Partners advise entrepreneurs to consider factors such as experience, network, and value-add when selecting an investor.
In the UK, angel investors significantly fund early-stage start-ups, with £2 billion invested annually. Brooks Newmark, an experienced angel investor, offers six essential tips for investing in start-ups, including diversifying investments and conducting thorough due diligence.
Another financing option is a merchant cash advance, providing businesses with a lump sum in exchange for a percentage of future sales. This method offers quick and flexible access to funds, but understanding the associated costs and risks is key.
Convertible loan notes (CLNs) present another solution for raising finance. Joss Alcraft, principal at Matthew Arnold & Baldwin, explains that CLNs allow investors to convert their debt into equity later, offering a flexible and potentially rewarding investment opportunity.
Businesses aiming to raise £1 million or more have several options, including equity crowdfunding, venture capital, and government grants. Marc Barber details 15 ways to raise finance, emphasizing the need to tailor the approach to the business’s specific needs and goals.
Finding the Right Investor for Your Business
Angel investors provide key seed and pre-seed funding for start-ups, but finding the right network requires understanding their criteria.
For young businesses, pre-seed funding can be a viable option to kick-start growth. Additionally, EIS funds offer another avenue for investment, with active funds available in the market.
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