The economic downturn of five years ago has changed the landscape for many people.
With unemployment rising and intense competition for job opportunities, many have embraced entrepreneurship and are keen to go into business for themselves. The major stumbling block for many would-be entrepreneurs, however, is finance.
Coming up with a credible idea is difficult, however, even if you do come up with an idea, securing the necessary starting capital is difficult in the current economic climate.
Bank lending has been one of the biggest casualties of the economic downturn, with small businesses in particular finding it difficult to secure the funding they need. The picture is equally bleak for would-be entrepreneurs.
That does not mean, however, that there are no other options on the table.
One option is to use bridging loans for business ventures, while other avenues you could explore include borrowing from friends and family or taking advantage of government schemes designed to help those in such a situation.
Below, we look at each in more detail and how they could work for you.
As banks have tightened their purse strings, bridging loan providers have flourished.
Many businesses and consumers have turned to bridging finance to meet their financial needs and if you need start-up capital for a business venture then they are an option you should look at.
To qualify for a bridging loan, you need a property you can use as collateral and the amount you can borrow will be determined by the amount of equity you have in the property.
Issues such as employment status and credit rating will be taken into consideration, however, neither are likely to determine how successful you are.
The more relaxed lending criteria is one of the key selling points of bridging loans, as is the fact that you can borrow a significant amount.
On the downside, bridging loan interest rates are high, meaning they are only suitable as a short-term solution.
Provided you have a credible exit strategy and have a plan in place to repay the loan within 12 months, bridging finance could work for you.
The government recently announced the launch of a new scheme designed to provide budding entrepreneurs with the finance they need to begin their business venture.
Called Start-up Loans, the aim is to provide a small amount of capital and support to help get the ball rolling.
Various organisations are being invited to participate in the scheme.
The upside is that you do not need to own a property to receive the funds, which is the case with bridging loans. However, your scheme may not be accepted and even if it is, only small amounts of capital are available and you may not be able to access enough to get you started.
Borrowing from family
This is not an option for most people, however, if your family does have the means to help you get started, it is something to consider.
You will not get into debt in the traditional sense, however, you need to bear in mind whether you are happy to take the risk with money your family have worked hard to accumulate.
The entrepreneurial spirit is strong in many people and if this applies to you, bridging loans could be a good option if the banks are refusing to finance your venture.
Raising the money you need to start a business can be hard, however, there are alternatives to bank loans. Among them are bridging loans, peer-to-peer lending and borrowing money from friends and family, meaning you need to do plenty of research.
Before taking out a bridging loan, you must understand a number of key points. These include the rate of interest you will be charged, the length of time you have to repay the loan and whether there are any arrangement fees that apply.
You should only consider bridging finance if your funding needs are temporary. This is because the high rates of interest make bridging finance unsuitable as a long-term solution, so if you have long-term needs, you should look at other options.
Both banks and specialist bridging loan companies can provide the bridging finance you need, meaning you need to compare products from a range of providers. You need to look at factors such as interest rates and arrangement fees.
Some bridging loan companies will lend up to £5 million if you have sufficient equity in your home, however, what if your borrowing needs are more modest? If you need a sum of £10,000, bridging loans can still be an option.
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