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6. Raising Finance

Depending on your business, as a freelancer you may not need to raise too much money, therefore a bank loan/overdraft or borrowing from family may be your best option to minimise costs, especially in the early days when you would be considered a riskier investment.

Bank loans

With a clear business plan and cashflow forecast you can approach your bank for a loan. The best place to start is the bank with whom you already have a personal account as they will know your history and be more likely to help you.

The one thing all banks are most interested in is what security you can provide, i.e. what assets do you have that they can sell if you default on your loan. The most obvious and by far the most common will be your house. For all but the smallest borrowings you can expect your bank to ask for a "charge" over your home. This means that in the event you cannot repay the loan they are entitled to force a sale on your house to recover their money.

Government grants

There are hundreds of different types of government loans, schemes and grants available. Some are for small amounts and others for quite sizeable sums. The criteria for the loans range from location of the business, employee numbers, type of employee, sector of the business and so on. One popular and well known grant provider is the Prince's Trust. The Prince's Trust considers loans and grants for young people aged 18 to 30 who are unemployed, underemployed or of limited means. You can get support, advice and practical help on starting and growing a business. Tel: 0800-842842 to get your local number or contact The Prince's Trust, Tel: 020-7543 1234 E-mail: webinfops@princes-trust.org.uk Website: www.princestrust.org.uk.

A great website resource for over 2000 different types of loans and grants is at www.j4b.co.uk

Other sources of funding

Other sources include the European Commission grants and loans
Tel: 00800-6789 1011. European Investment Bank: Tel: 020-7343 1200.

What other options do you have to raise money should you need to however? If you are looking to grow your company into a small business at a later stage, you may look to bring a business angel on board within about a year of setting up the company. The angel investor would typically invest between £50,000 to £70,000 in return for about 25 per cent of the company.

In the same way that a Business Angel will demand a strong business plan and subject your plans to rigorous cross examination, then entrepreneurs should also do their homework on potential investors. Establish what other investments your business angel has made and talk to those companies. Find out where their expertise lies, how much they help (or interfere!) and how successful their advice has been. In return for a share in your company, your business angel should provide expert advice, security, experience and contacts - as well as the all important cash.


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