Where can I get funding for my startup business?

You have a great idea for a product or service that’s going to bring some value into the world. But you know you need money to help get your startup idea off the ground. Where do you look and how does this work in practice?

In this post, we’ll see how your startup can get funded.

What do I need to supply to get startup funding?

Because your new business has no background or credit history of its own, it’s essential that you put together a solid business plan that sets out the problem your business is going to solve and how you’re going to do it.

Potential investors will want to know how much money you need, how you intend to use it and how you can give them a return on their investment. You’ll increase the chances of an investor opening their wallet to you by clearly expressing:

  • why the investor should invest in you, and
  • what the investor will get out of it.

As the saying goes, “people invest in people”. Even though your plans should include figures to show that your business case that stacks up, your potential investors also need to build trust in you and your team. Investors will want to hear your clear take on the problem your business solves and why you came up with your idea. You and the plan both need to be credible.

Investors need to feel confident that their investment is going to be repaid, so paint a picture of a sales/exit strategy that benefits everyone involved.

All of this may seem unfamiliar territory. After all, you might be trying to build an app, create a popup restaurant or imagine some other new product or service. Your skills lie in doing that thing, not in writing business plans or considering finance options and exit strategies.

Rather than muddling your way through in the hope of convincing an investor to part with their cash, it’s often wise to seek help when putting together the plans for your startup.

We’re used to talking with startups and positioning their new businesses in a way that appeals to potential investors. We can make introductions to relevant finance providers and industry contacts. Get in touch if you need a hand.

Before you look for investment

Aside from building a solid business plan, what else should you do to give your startup the best chance of receiving funding?

Our best advice is to do as much as possible by using your own personal funds. That might also involve borrowing from family and friends. It’s never easy to ask for money, but this is a more realistic early route than approaching a bank and expecting them to support a new business with no credit history.

Self-funding, including earnings from work you do in separate jobs, will show investors your commitment to your idea. After all, why should they take a chance on you unless you’ve shown the willingness to take a risk first?

Those early funds can also be crucial in helping you build a prototype of your idea. If you can create something to show to potential investors, that will be far more convincing than an idea on paper.

If your plan is to sell a physical product, could you get a model built? If it’s an app, could you make a video showing what it might do? If you’re creating a restaurant, could you develop a menu and some sample dishes?

There’s another important point to consider while you’re getting ready to pitch your idea to the world. The last thing you want is to share your plan before you’ve protected your intellectual property (IP) and investigated any relevant copyright issues.

Failing to do this means that your idea could be used without you getting any of the credit. Take the necessary steps to protect your startup before seeking investment or go to market.

Where can startups look for investment?

Let’s say you’ve developed your business plan and have put your own funds into getting some form of prototype ready.

Having reached the limits of what you can do by yourself, you now want to secure some funding to grow your startup business. Here are some routes to investigate.

Business Gateway

Business Gateway is known for offering courses on how to get started and improve your business.

It can act as a stepping stone to accessing funds to help your startup. Though you won’t receive any money directly from Business Gateway, you can make connections with relevant organisations who may be able to help with investment.

For example, promising new companies in Scotland may pass through Business Gateway and be referred to Scottish Enterprise, who in turn can help with access to government-backed grants.

Business Gateway can also advise you about research and development grants and other routes to access funds to support your startup.

European funding

Startups can benefit from loans of up to £25,000 via the Scottish Growth Scheme, a £500 million package of financial support for Scottish businesses from the Scottish Government and the European Regional Development Fund. This fund isn’t tied to the UK’s status as a member of the EU (in other words, it’s not affected by Brexit).

At MHA Henderson Loggie, we’ve successfully helped clients raise debt finance through Business Loans Scotland (https://www.bls.scot/), but these funds can also be accessed through:

  • DSL Business Finance Ltd
  • Business & Enterprise Scotland Ltd
  • Techstart Ventures
  • Foresight Group

As you might expect, accessing funds like this isn’t just a simple case of filling in a form, so it’s best to talk to a competent professional partner who can help. We make introductions like this for many of our startup clients, so get in touch if you’d like to discuss this further.

Debt funding of up to £100,000 is available for more established businesses, so these loans aren’t just for startups.

Business angels

Most of the business angel networks in Scotland will be registered with LINC, the Scottish Angel Capital Association, and details of their investment preferences and appetites can be found on the LINC website (https://lincscot.co.uk/). Look up the “business angels” who are interested in your field. They have their own websites that allow you to submit your plans.

Such submissions generally go to a gatekeeper who then filters the applications and proposes the most relevant and interesting plans at the angel investor meetings. Your plan needs to be attractive enough to survive the selection process and be offered up in front of the investors.  It can help to have talked to one or more of the angels directly in advance and have them champion your plan. Meetings might take place every few weeks or months, so you may need to be patient. In most cases, significant investments are unlikely to be arranged quickly.

Business introductions

Your accountants are likely to have their own network of high-net worth individuals. In our case, we often make introductions between our startup clients and our network of clients who have expressed an interest in making such investments.

To give our startup clients the best chance of securing the funding they need, we help them brush up their business plans to make them “investor ready” before passing them on to their potential future business partners.

Also, our network includes bankers, lawyers and other professional service providers, so we can often make introductions that help startups with the other tasks associated with doing business.

Does my UK location affect my potential for startup funding?

Your location usually isn’t relevant to whether you can secure funding for your startup.

However, when it comes to local authority-backed grants, the funding process can differ a little across the UK.

Regional Selective Assistance grants, for example, depend on your postcode. In areas with low employment, Scottish Enterprise may offer a grant based on your business employing staff. The extent of such a grant depends on the area you’re in and number of employees you take on.

Schemes like this are based on your business making a financial outlay and then recouping some of your costs – so you still need the funds to spend in the first instance.

How true is the Dragons’ Den version of startup funding?

The good news is that the reality of dealing with investors is less adversarial than what we see on TV. What works on an entertainment show doesn’t always reflect the truth of business.

If you meet with a potential investor, it’s safe to say that they’re already interested in working with you. The difficult part is getting them into the room to begin with.

So, the challenge is to get on their radar. Getting a startup funding deal over the line is more about good research and preparation than it is about a face-to-face battle of wits.

How are startup funds paid?

Even if you’ve made a winning case, remember that any investors in your startup will need a legal agreement before a penny is exchanged.

Your business plan should include details on what you’re offering to investors and this will form the basis of negotiations over the investment structure such as how many shares their money gets them and how many seats they’ll occupy on your board.

With this information clear, agreed and legally binding, your investors will deposit money into your business bank account. Remember that there should be no doubt about what the money will be used for and how long it’s expected to last.

Investors don’t want surprises. Do everything you can to uphold your side of the agreement.

Let’s sum up

Running a startup isn’t easy and neither is securing funding to help it grow.

Potential investors need convincing before they loosen their purse strings. Our best advice is to build a robust business plan that stands up to their close inspection.

Start small and do what you can with your own funds first, including creating a prototype of your product or service to build your credibility and help give investors confidence in your work.

Be clear on what problem you’re going to fix and let the investors buy into you as much as they do the business itself. Approach Business Gateway and look for business angels who can make referrals to the right groups, and keep in mind that some startups may be able to access government-backed grants.

Finally, speak with the people who can put your plans in order and give you the best chance of connecting with the investors who can help make your startup a success.

To chat with us about how we help connect our startup clients with potential investors, get in touch now.

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5 common mistakes by new small business owners

For years, startups and small business owners have come to us to help them manage their accounts.

Over that time, we’ve learned a lot about the issues that catch people out.

In this post, we’ll look at the 5 most common problems we see day-to-day, and how your small business can avoid them:

  1. Not preparing or planning
  2. Not paying attention to paperwork
  3. Not considering the business structure
  4. Not separating business from personal finances
  5. Not asking for help

Common mistake 1: not preparing or planning

Before you start trading, it’s important to get a solid business plan in place. This starts with asking yourself some basic questions about your business:

  • Does anyone need your product or service offering?
  • Is your business likely to be sustainable?
  • What is the value of your product or service?
  • How much will others be willing to pay for it?
  • How much will it cost for you to deliver the product or service?
  • What investment might be needed?
  • Will you need to borrow to get started?
  • How will you fund your business?
  • Will you need external help to deliver the product or service?
  • How will you market your business (via a website, social media or other routes)?

We often find that many new startups haven’t thought about these questions in detail. But the better prepared they are, the more likely they are to develop a sustainable, profitable business.

When we talk to our clients, we get them thinking about these and other questions to help give them the best chance to succeed.

Common mistake 2: not paying attention to paperwork

We know that managing your records isn’t the reason you got into business. That’s why there are people like us in the world – to help with the boring tasks while you get on with the interesting stuff.

But whether you get accountancy help or not, you still need to keep good records.

Business owners often make the common mistake of operating their business by looking at their bank account instead of maintaining proper records.

This can mean missing vital financial milestones such as when income reaches the threshold for mandatory VAT registration. Get this sort of thing wrong and you may be fined.

Keeping the right records means you’ll be best placed to pay the right amount of tax at the end of each year, while sidestepping fines and avoiding unnecessary scrutiny from HMRC.

On top of keeping financial paperwork, don’t forget the documentation that’s directly relevant to your products and services. For example, do you have terms and conditions? Are they up to date and compliant with current legislation (such as GDPR and VAT MOSS)?

There are also other related documents to keep up to date, such as refund policies and warranties.

Consider such issues upfront rather than waiting until after the fact. The last thing you want is a customer complaint to make you realise that you’re missing an essential document or process.

Don’t forget the other paperwork-type considerations, such as organising the right type of insurance and securing the protection of any relevant intellectual property. While we don’t specialise in such matters, we’re always able to make referrals to good service providers who can help.

Common mistake 3: not considering the business structure

It’s common to assume that going into business means being either a sole trader or a limited company. But it’s not quite that simple.

In fact, there are 5 possible structures for any business:

  • Sole Trader
  • Partnership
  • Limited Liability Partnership
  • Limited Company
  • Community Interest Company (social good, not for profit)

Your options depend on whether you’re working solo or in a business with others, but there’s more to it than that.

For example, you need to consider who your customers are. You might need to set up as a limited company in order to work with certain other companies. Consider also who your customers trade with.

Another common mistake in this area happens when new business owners go into business with friends. Have you considered what would happen if your professional or personal relationship were to go wrong? It’s risky to assume that things will never change. They can and they often do, so be prepared.  

To set up your business for success, put clear contracts in place and agree on the constitution of your business entity from the outset.

Common mistake 4: not separating business from personal finances

It’s essential to follow the golden rule for expenses: claim only for the expenses that are wholly, exclusively and necessary during the everyday running of your business.

There can be grey areas for expenses that relate to items that are used for business and non-business purposes. The most common examples are smartphones, tablets and laptops.

We’ve written another article that goes into the topic of expenses. Take a look at Startup expenses: what you can and can’t claim for the details.

Common mistake 5: not asking for help

It’s natural to wear lots of hats when you’re getting a new small business or startup off the ground. But there aren’t any medals for doing everything alone, and this approach can sometimes lead to early burnout.

Often, it’s best to hand the tasks that you’re not an expert in, to someone who could get it done faster, better or cheaper than you could do it yourself.

In the case of accounts, you could start by using cloud accounting software such as QuickBooks or Xero. These tools quickly simplify the task of keeping your financial records in order.

If you want further help with managing your money, an accountant could make a difference. Not only would they make sure you pay only what you owe but they would also help you free up more time to do the higher-value work needed to help your business grow.

Let’s sum up

Those were the 5 most common issues we see startups and small businesses struggle with.

If you need a hand avoiding these and other problems so that you can focus on earning more money in your business, get in touch and let’s have a chat.

What to expect at an introductory meeting with us

What happens when you go to meet an accountant for the first time? How long does it take? Do you have to pay? What sort of preparation do you need to do?

If you’ve never worked with an accountant before, these questions are quite normal.

To set your mind at ease, here’s what to expect when you come in for an introductory meeting at MHA Henderson Loggie.

First of all, let’s set the scene about our intro meetings:

  • they’re free of charge and involve no commitment.
  • they usually last 30–60 minutes.
  • we won’t give you the hard sell.
  • you won’t need to sign anything.
  • you will get coffee and a chocolate biscuit.

You don’t need to bring anything with you to the meeting, but if you have a business plan or some accounting records, they might help to speed things up a bit.

We use these intro meetings to find out more about each other. We know a new university graduate looking to start a business will need something different from an experienced company owner looking to wind down a bit.

Finding out more about you means we can understand what you’re really looking for from an accountancy service. That way, we can recommend which of our departments would be best to support you, should you decide to work with us.

The meeting also gives you a chance to try us on for size. If you ever wanted to work with us, you’d need to be sure you like us and that there’s some rapport before you jump in. Our no-strings chat lets you do that without the pressure of having to sign any agreements or contracts.

What about after the meeting?

Once the intro meeting is over, we’ll send you a proposal of what we think would be best for you, based on what you’ve told us. Because we don’t use set packages, the meeting is important in helping us come up with a service tailored to you and your needs.

Sometimes, we might need to get specialist input before we can draw up your proposal. For example, you might have asked some questions that we need to refer to our corporate finance department. In such cases, it might take us a little longer to send over your proposal.

Even at this stage, we don’t ask for any signatures or commitment from you.

You can review your proposal in your own time and then let us know whether you’d like to move forward.

If you accept the proposal, we’ll do a little happy dance (not filmed) and then start the process to get you on board as a new client.

This onboarding is usually quick if you don’t already have an accountant. But we’ll check with the relevant advisers if you do already have an existing accountant, as a professional courtesy.

Let’s sum up

That’s a quick look at what to expect from intro meetings with us. It’s a friendly, no-pressure environment, and a great way to check that we like each other before considering whether to work together.

Get in touch now to arrange an intro meeting. We look forward to welcoming you.

👇 Find out more about us 👇

Andy Niblock

Andy provides audit and accountancy services to clients in both the commercial, charitable and agricultural sectors. He trained and worked for a Big 4 firm, and also worked in industry for a period before returning to the profession. Andy is Head of our Agriculture & Rural Team.

Andy has very much a hands-on approach due to his time spent in industry, and understands the practical issues of running a finance function and the issues they are faced with.

Andy also specialises in outsourcing of finance functions, providing this service to companies without their own in house finance team. The service Andy provides means he’s often involved with companies on a day to day basis, providing advice and ensuring their time is freed up rather than worrying about the financial administration side of their business.

Angela Whyte

Angela provides audit services to commercial clients, ranging from small to large corporates, across an assortment of sectors including publishing, retail and construction.

She also manages a portfolio of Further Education Colleges across Scotland, providing external audit services, as well as managing a range of accounting and management accounts assignments.

Angela trained and qualified with MHA Henderson Loggie.

David Smith

David Smith is the Managing Partner of MHA Henderson Loggie. As the firm’s business leader, David works closely with his fellow Partners and staff, coaching and supporting their delivery of services to meet clients’ needs across a range of sectors.

Driving growth and facilitating the implementation of the firm’s strategy is a key role as Managing Partner, but David also has an established reputation as a strategic advisor and coach.

David leads the firm’s Business Growth Solutions team, advising clients on growth and profit improvement, strategic planning, leadership development, personal development, lean management, implementing change and blended learning to coach and support our clients to achieve their goals.

As an accredited business facilitator and coach, David has been supporting, coaching and training businesses and business leaders for 20 plus years. This includes our Business Leader Groups, providing leaders and owners with the opportunity to free themselves from the day to day, to focus and prioritise, build their skills and capabilities, while holding them accountable. David offers guidance and support as a coach and further support is available through the Business Leader Group peer network.

Outwith work, David has been an energetic supporter of the Dundee fundraising group of Cancer Research UK, for many years as the group’s Honorary Treasurer. He is also a proud Burgess of the City of Dundee, celebrating the past, present and future of the city and is active on the Scottish Committee of Fields in Trust.

Fiona Morgan

Fiona works with a variety of owner managed businesses and charities, both large and small, advising them on accounting, taxation and business improvement. Fiona is also responsible for the provision of the audit service within Aberdeen office.

Fiona’s clients operate in numerous sectors including food & drink, tourism, manufacturing, oil & gas service, professional services, retail, property development and recruitment. Working with them from inception through all the crucial phases in the development of a business, she has a personal approach which ensures that she can provide advice and re-assurance when it’s most needed.

Using her experience with Mindshop International, Fiona helps clients develop their businesses through business improvement services, specifically strategic planning, sustainable competitive advantage, family business issues, leadership development, personal development, and lean management..

George Hay

George is an experienced auditor and business adviser having worked in a wide variety of sectors and roles throughout his career. George’s focus is on the Agriculture & Rural Business and Charities sectors while continuing to act in a business advisory capacity for his long-standing commercial clients.

George likes nothing more than working tirelessly with his clients to assist them meeting their objectives and co-ordinating the firm’s specialist services to achieve this whether that be in the area of organic growth, acquisitions, disposals or effective tax planning.

George is also an accredited mediator.

Ian Cameron

Ian has over 20 years’ experience as a Partner in Henderson Loggie dealing with a varied portfolio of clients, both large and small, helping them with all their financial requirements. He provides general business advice and accounts preparation, as well as both personal and corporate tax.

Ian acted as local secretary for ACCA and was also as part of the Scottish Executive Committee for ACCA where he acted as the National Technical Liaison Officer.

Ian is Head of the firm’s Motor Retail Sector Group.

Mark Hay

Mark is a Director in the Accounting & Business Solutions department, working with small and medium-sized owner-managed businesses, operating in a number of sectors such as food & drink, oil & gas service industry, manufacturing, property development, professional services, and retail.

Mark oversees the provision of various services to our clients including the preparation of statutory and management accounts, VAT returns and corporation tax returns. He is also responsible for other assignments including; incorporations, business planning and the preparation of cash flow projections.

Mark has experience in a variety of different accounting software packages including SAGE, KashFlow and FreeAgent.