Financing a business
A grant is an amount of money given to an individual or business for a specific project or purpose.
You can apply for a grant from the government, the European Union, local councils and charities.
You won’t need to pay a grant back, but there’s a lot of competition and they are almost always awarded for a specific purpose or project.
- you won’t have to pay a grant back or pay interest on it
- you won’t lose any control over your business
- you’ll have to find a grant that suits your specific project, which can be difficult
- there’s a lot of competition for grants
- you’ll usually be expected to match the funds you’re awarded, eg a grant might cover part of the cost of a project but you’ll have to fund some of it yourself
- grants are usually awarded for proposed projects, not ones that have already started
- the application process can be time-consuming
Crowdfunding (also known as crowd financing or crowd-sourced capital) involves a number of people each investing, lending or contributing smaller amounts of money to your business or idea. This money will then be pooled to reach your funding target.
Your idea will usually be showcased through a crowdfunding website.
Advantages of crowdfunding include:
- it provides an alternative to funding from conventional means, eg bank loan
- you can raise finance relatively quickly, often without upfront fees
- it can raise awareness of your new business
Disadvantages of crowdfunding include:
- your idea could be copied if you haven’t protected it with a patent or copyright
- any money you raise will normally be returned to investors or contributors if you don’t reach your funding target
- crowdfunding is mostly unregulated (but from 1 April 2014, loan-based and investment-based crowdfunding will be regulated by the Financial Conduct Authority)
You can look for either: