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By miguel-ingles
- In Uncategorized
For a new entrepreneur in the UK, it can be difficult to find the best choice to get extra capital for their company. There are many possibilities available in this country, each one with its advantages and disadvantages. Therefore, in this article I explain the different funding options for startups in the UK.
Private Funding Options for Startups in the UK
Angels Investors
People considered as angel investors are those who contribute large amounts of financial resources to a startup company. In addition, they also often offer mentoring and training services to the business. In return, they will receive a part of the company’s stock. Consequently, their goal is to make the business successful, so the value of their shares increases.
There are several ways to find and attract angels investors. The first one would be through personal and professional networks. The second, through communities of entrepreneurs where you can meet investors. Finally, there are networks of angels, which combine their resources and act in unison. They will require you to send them the characteristics of the company through a webpage or by email.
Venture Capital Funding Options for Startups in the UK
Venture capital firms seek to invest monetary funds in exchange of shares of corporations that are not listed on the stock market, but that have high growth potential or an innovative business model. In the UK, this is the most common way startups find funding.
Venture capital firms differ from angel investors in that the former do not devote personal resources. Instead, they raise money from institutional investors, such as pension funds, insurance businesses, or foundations. In addition, venture capital companies usually invest larger amounts of money than angels.
Startup Incubation and Acceleration Programs
Startup incubation and acceleration programs are companies that provide financial funds as well as human resources or professional experience to advise a client. The first ones support an emerging business from their formation stage until they can operate independently and provide advice, training and financial funds. The second act in already established companies and seek an explosive growth of an enterprise at the same time as it solve their weaknesses and face the threats of the market. To do this, accelerators use the same methods as incubators. In this article, you can find more information about these types of companies.
Public Funding Options for Startups in the UK
Seed Enterprise Investment Scheme (SEIS)
This scheme offers tax exemptions and deductions to investors who contribute funds and acquire shares of companies that have registered in it. Therefore, it aids a business to get money in its early stages.
A business will be able to receive up to 250 000 GBP thanks to SEIS. In this link, you can check the conditions for benefiting from this plan.
Enterprise Investment Scheme (EIS)
The EIS is similar to the previous one, only that it focuses on already consolidated and medium-sized startups. It allows investors to buy stocks for a value of up to 1 000 000 GBP per fiscal year and receive a 30% tax reduction for that period. In addition, they may also be eligible for exemptions from the Capital Gains Tax if they hold the shares for a minimum of 3 years.
In this website, there are further details about what the Enterprise Investment Scheme is.
Bootstrapping in the UK
Bootstrapping consists of starting a business with limited resources that do not usually come from external funding. That is, it is about commencing to operate with a business using own capital.
This business model carries a number of advantages and disadvantages. On the one hand, it allows full control of both the decisions and the expenses of the corporation. Moreover, smart resource management and innovative decisions are encouraged. All this results in a high profitability of the business in the short term.
On the other hand, all the responsibility for the losses is assumed, so in case the company fails, the entrepreneur must face the debts with their assets. It also limits the company’s capacity for growth, as it will have to wait to perceive profits to invest them.
In ukstartcompany, you will find information about how to establish, register and operate companies with different legal structures and business activities in the UK.