Sources of funding€¦ · This unit offers you an overview on funding strategies, cash flow management to sustain the growth of the venture, and traditional and new sources of funding,

OpenLearn Works

Sources of funding

Copyright © 2019 The Open University

2 of 22 http://www.open.edu/openlearncreate/course/view.php?id=3927 Friday 31 May 2019

http://www.open.edu/openlearncreate/course/view.php?id=3927

ContentsIntroduction 41 Funding strategies 52 Cash flow management 8

2.1 Profit and loss statement 92.2 Balance sheet 102.3 Cash flow statement 12

3 Alternative sources of funding 143.1 Borrowing 143.2 Equity 15

4 Grants and initiatives 184.1 Finding a grant 184.2 National and regional initiatives 18

Summary 21References 21Acknowledgements 22



IntroductionHave you ever thought, ‘Where does the money come from that I need to start and growmy business?’ Many start-up entrepreneurs face this challenge. To help you understandthe role of money in entrepreneurship, this unit focuses on funding and the fundamentalsof cash flow management to get you started.Young and innovative entrepreneurial businesses help create, develop and grow newtechnologies, industries and markets and provide solutions to pertinent societalchallenges. Yet, these businesses need considerable amounts of financial resources toget started, grow and succeed. Considering the importance of entrepreneurship for theoverall economic system, there is a need for a better understanding of distinct sourcesand types of funding, and of how those sources of funding can be used by start-ups andhow they affect the growth and sustainability of new ventures.This unit offers you an overview on funding strategies, cash flow management to sustainthe growth of the venture, and traditional and new sources of funding, as well as grantsprovided by the UK government and regional initiatives.By the end of this unit you will be able to evaluate the pros and cons of different means offunding and support for your venture.

Introduction



1 Funding strategiesHow business start-ups are financed is one of the most important questions inentrepreneurship. The first thing that you will learn as a start-up entrepreneur is that not allmoney is the same. As Burns (2016, p. 359) puts it, ‘Different sorts of money ought to beused for different purposes and not all types of money are available to all new ventures.’Table 1 depicts the main types of financial capital and how they should be used.Generally, the term duration of the source of finance should fit with the term duration of theuse to which the money is put. That means that fixed or permanent assets should befinanced by long- or medium-term sources of finance. Short-term finance, such as anoverdraft, serves the purpose of mitigating fluctuations in working capital.

Table 1 Sources and uses of financeDurationoffinance

Source of finance Use of finance

Long-andmedium-term

● Equity○

Personal, family and friends investment○

Angel finance○

Venture finance● Long- and medium-term loans

○

Personal, family and friends○

Bank● Lease and hire purchase● Crowdfunding (equity or loan)

● Fixed assets: land, buildings, machinery, plant, equipment, vehicles, furniture etc.● Permanent working capital: stock, debtors (net creditors)

Short-term

● Bank overdraft● Short-term loans

○

Personal, family and friends○

Bank

Seasonal fluctuations in working capital: stock, debtors (net creditors)

Source: Burns, 2016, p. 359

In practice, start-up entrepreneurs rely on a combination of various inflows of money.These are broadly classified by source (formal or informal) and by type (debt or equity).As it is easily available at short notice, start-up entrepreneurs often try to fund their newbusiness with their own money, typically coming from savings and borrowing, secure on aproperty or unsecure on a personal guarantee. Credit cards are an easily accessible andflexible source of funding, albeit an expensive one.

1 Funding strategies



Having exhausted their personal capital, many entrepreneurs borrow money from friendsand family members – i.e. bootstrapping. These informal investors often require lowerreturns than formal investors such as venture capitalists and business angels. Relativesand friends are even approached before founders ask banks for loans.However, informal sources of funding are not unlimited. For sustainable growth,entrepreneurs need to turn to more formal sources of funding, either by borrowing moneyfrom banks, i.e. loans, or by raising equity from formal investors (Blundel et al., 2017).The purchase of fixed assets can also be financed by lease. Having a lease allows thefirm to use an asset without owning it. They can make regular lease or hire purchasepayments, which allows the firm to purchase the asset over a period of time, and the assetcan be used as security in the event of default (Burns, 2016).Crowdfunding is a novel source of funding. It allows individual investors to support newventures with relatively small contributions and is typically via online platforms.Crowdfunding can take the form of equity investment and loan capital, debt finance orpeer-to-peer lending (Blundel et al., 2017).Most start-up entrepreneurs find it challenging to conceive of an appropriate fundingstrategy and to decide on sources and types of funding. The flowchart in Figure 1 guidesyou through the process of deciding what type and source of funding is most appropriateand available to you.

Figure 1 Designing a funding strategy (Source: Burns, 2016, p. 361)

Activity 1 Designing your personal funding strategyAllow approximately 30 minutes to complete this activity

Use the flowchart depicted in Figure 1 to help you plan a funding strategy for your newventure.Reflect on the constraints and obstacles in getting access to the financial capital thatyou identify in the process. What opportunities do you see to overcome them?




Provide your answer...

DiscussionEveryone’s circumstances are different but you might have thought of the followingconstraints and obstacles:

● Lack of awareness of opportunities to apply for a grant● No money available from family or friends● Lack of personal savings● Difficulties in attracting co-founders● Personal circumstances, such as age, health and family situations, family and

work commitments● Lack of knowledge in business and management.

Opportunities to overcome obstacles include, but are not limited to, seeking advicefrom experts in finance and/or entrepreneurship, applying for support from a businessincubator or an accelerator, and joining networks of like-minded start-up entrepre-neurs.




2 Cash flow managementEvery entrepreneur needs to think about money – making money, investing money,spending money, having enough money to pay the bills. But have you ever askedyourself, ‘What is money?’ Sometimes it appears to be so important that you could beforgiven for thinking that money is all that entrepreneurship is about. Of course,entrepreneurship means many more things and money is only one of them.About two-thirds of small businesses face money problems. Reasons for these problemsare, for example:

● difficulties in collecting money due from customers● seasonal variations in sales● critical incidents, such as increasing prices for raw materials or an unexpected

decrease in sales.

All enterprises have different cash-to-cash or operating cycles; i.e. the time it takes for abusiness to access capital and resources, produce and sell its goods and services, andcollect cash from sales. Depending on the type of business, the cycle can take just a fewhours or up to several years.Many small businesses fail because they underestimate the time lag between receivingcash and spending cash, or they experience a mismatch between the size of paymentsreceived and the size of payments that must be made (Burns, 2016). To avoid theseproblems you need to understand the flows of money that come in and go out, chiefly thebasics of managing cash flow.Cash can come from three different sources:

● Operations, which includes the sales of goods and services that you produce, andcollecting cash from customers.

● Investing, which comprises buying and selling shares, bonds, land, buildings andequipment.

● Financing, which means either cash given to the business in return for ownership(i.e. equity) or money borrowed from other sources, such as banks.

To understand the inflow and outflow of money, watch the following video, FinancialStatements Explained in One Minute: Balance Sheet, Income Statement, Cash FlowStatement.

View at: youtube:6GVVTfj7ndcFinancial statements explained in one minute

The video introduced three important documents that you need for your cash flowmanagement:

● the balance sheet, which reflects your past operations and the net worth (equity) ofyour enterprise

● the profit and loss statement, which is sometimes referred to as an incomestatement and thus shows how profitable your enterprise is

2 Cash flow management



● the cash flow statement, which shows the inflow and outflow of your money andthus indicates how credible your profit numbers in the profit and loss statement are.

2.1 Profit and loss statementA profit and loss statement indicates the relationship between sales (revenue or turnover),cost of sales, gross profit, operating expenses, interest, tax and net profit for a specificperiod of time. It provides useful information for founders, shareholders, providers ofcapital and staff. A profit and loss statement is usually prepared annually.As shown in Table 2, the profit and loss statement reveals revenues and costs and howmuch profit has been made over a particular period (Blundel et al., 2017).

Table 2 Profit and loss statementPROFIT AND LOSS STATEMENT for the year ended 31 December 2016

Income 0£000 0£000

Sales 6,600,000

Stock at 1 January 2016 700,000

Purchases 4,900,000

5,600,000

Stock at 31 December 2016 ( 980,000)

4,620,000

Gross Profit 1,980,000

Profit Margin 30.0%

Expenditure

Establishment expenses 160,000

Administration 370,000

Selling and distribution expenses 1,200,000

Finance charges 20,000

Total operating expenses 1,750,000

Operating profit 230,000

Net interest 30,000

30,000

Net profit before taxation 200,000

Net margin 3.0%

Tax 40,000

Dividends 10,000

50,000

Net profit retained 150,000

Source: Blundel et al., 2017, p. 183




A profit and loss statement includes:

● Income (generated by business activities but not interest received)● Cost of sales (cost of purchased goods and manufactured goods, including

manufacturing overheads and wages)● Gross profit (income less cost of goods)● Profit margin (gross profit / income x 100)● Operating expenses (overhead and staff, excluding wages for manufacturing)● Depreciation● Operating profit (gross profit less operating expenses)● Interest● Net profit (gross profit less operating expenses and interest)● Net profit before tax● Net margin (net profit before tax / income x 100)● Corporation tax● Net profit after taxes.

Every start-up entrepreneur needs to know how to prepare a profit and loss statement.Consider that, for a start-up, it is important to complete this statement on a monthly basisfor at least the first two years. This enables you to spot trends. Activity 2 will help you toprepare a profit and loss statement for your own business.

Activity 2 Preparing a profit and loss statementAllow approximately 15 minutes to do this activity

Use the example shown in Table 2 as a guide to produce a profit and loss statement foryour own venture. It should reflect the projected results of the operation for a givenperiod of time.DiscussionDid you find this exercise easy or difficult to do? Are there still parts of the profit andloss statement that you don’t fully understand? For example, you might not be sureabout how high your tax burden will be. Depreciation is also an issue. For taxpurposes, you may deduct the cost of the tangible assets you purchase as businessexpenses. Thereby, you must follow the national tax laws about how and when youmay take the deduction. A conversation with a tax advisor might be useful.These examples reveal that you should consider each line of your profit and lossstatement thoroughly and reflect on what the numbers mean to your business. The netprofit retained will not only be used for the assessment of how profitable your businessis, it will also be included in your balance sheet.

2.2 Balance sheetUnlike the profit and loss statement, which focuses on a specific period of time, thebalance sheet is a projection of assets, liabilities and equity at a specific point in time. Asdepicted in Table 3, the balance sheet summarises the financial situation of the business




at, for example, a month end or the year end. The net worth must equal assets minusliabilities and ownership equity.

Table 3 Balance sheetSUMMARY BALANCE SHEET as at 31 December 2016

0£000 0£000

Fixed assets

Tangible assets 45,000

Investments 20,000

65,000

Current assets

Stocks 980,000

Debtors 1,410,000

Cash at bank and in hand 110,000

2,500,000

Total assets 2,565,000

Creditors: amounts falling due within a year (2,200,000)

Net current liabilities 300,000

Total assets less current liabilities 365,000

Capital and reserves

Owners share capital 1,000

Profit and loss account, including £150,000 for

year end 31 Dec 2016 364,000

365,000

Source: Blundel et al., 2017, p. 185

Let’s turn to assets first. The first area to look out for is fixed assets. These include thingslike computers, furniture, stock and other physical items. Current assets – also referred toas short-term assets – comprise things such as cash in the bank and in hand, money inthe till and anything you are owed (i.e. your debtors). In contrast to fixed assets, currentassets can include any assets that will be converted into cash within one year from thedate shown in the heading of the company’s balance sheet.Now let’s turn to liabilities – the amount that your business owes to other entities.Creditors means the amount of money you must pay out over the coming year, such asoffice lease and loan repayments. Accrued liabilities are expenses incurred but not paidfor, such as products, services and wages. Liabilities also include tax owed, such ascompany tax and employment-related taxes that need to be paid within a given timeframe.




The Financial Statements Explained in One Minute video introduced the notions of assets(such as cash in the bank, inventory or real estate) and liabilities (such as debt tosuppliers). Subtracting liabilities from assets shows you the net worth (or equity) of yourbusiness.Going beyond the video, you can consider the working capital. For this purpose, you mayhave a look at Table 3. The working capital is the difference between current assets (suchas cash, accounts receivable (i.e. customers’ unpaid bills) and inventories of rawmaterials and finished goods) and current liabilities (such as accounts payable).The net worth (or owner’s equity, sometimes also referred to as net assets) is calculatedfrom the total assets minus the total liabilities. It includes the share capital and retainedprofit or loss. If this figure is positive then the business is financially healthy. If it is negativethe business is insolvent and extra funds are needed (Blundel et al., 2017).Activity 3 will help you to prepare a balance sheet for your own business and reflect on itsfinancial health.

Activity 3 Preparing a balance sheetAllow approximately 15 minutes to do this activity

Produce a balance sheet that projects your business’s assets, liabilities and owner’sequity at a specific point in time. Use the sample balance sheet shown in Table 3 tohelp you.Looking at your balance sheet, is your business financially healthy?DiscussionDid you find this exercise easy or difficult to do? Are there still elements of the balancesheet that you don’t fully understand?As a starting point, you should have used any available numbers referring to your ownbusiness and inserted them into an Excel spreadsheet that looks like Table 3. Thevideo has shown how you can calculate the net worth (or equity) of your enterprise.This provides a snapshot of your business. Using the notion of working capital, youcan gain even more insights into the financial health of your business.

2.3 Cash flow statementThe final set of financial statements are projected cash flows. A cash flow statement isusually prepared last because it includes data from its corresponding profit and lossstatement and balance sheet (Barringer, 2015).

Both statements provide vital management information, but neither tells usanything about how much money is flowing in and out of the business.

(Blundel et al., 2017, p. 185–86)

The Financial Statements Explained in One Minute video illustrated that producing,analysing and interpreting cash flow is important for assessing the credibility of your profitand loss statement. But what exactly does this mean?

The basic idea behind a cash flow statement is to start with a beginningbalance, like the amount of cash you have on hand at the beginning of a month;



https://www.investopedia.com/terms/c/currentassets.asp

https://www.investopedia.com/terms/c/currentliabilities.asp


add your projected monthly income (or loss); and then list all the othertransactions that either add or subtract from your cash.

(Barringer, 2015, p. 246)

Typically, your cash flow statement (Table 4) should be divided into the balance broughtforward from the previous period, the income that your business generates, theexpenditure that you have for running your business, and the resulting balance that iscarried forward to the next period.

Table 4 Example cash flow statement

Week no. 1 2 3 4 5 6 7 8

Balance broughtforward

Income

Expenditure

Balance carriedforward

Activity 4 will help you to prepare a cash flow statement for your own venture.

Activity 4 Preparing a cash flow statementAllow approximately 15 minutes to do this activity

Produce a cash flow statement for your start-up, using the example in Table 4 as aguide.Reflect on the numbers that you see and think carefully about whether your venturewill be able to maintain a sufficient cash balance to run successfully.DiscussionDid you find this exercise easy or difficult to do? Are there still elements of the cashflow statement that you don’t fully understand?If so, you might reflect on the reasons for this. It is possible that you cannot easilyforecast any inflows and outflows of money. Making predictions about future sales, forexample, requires some market research and a good understanding of the customersthat you aim to serve.Similarly, you might not be fully aware yet of the expenditure that you will have tocover. For example, there may be an unexpected increase in the rent for yourwarehouse or you may not have fully considered the insurances that you might needfor running your business.




3 Alternative sources of funding

Getting the money to start or grow a business seems like one of the greatestchallenges, but in reality most people who try find the means to get theirbusiness going. There are two reasons for this. First, financing is often easierthan people think, because most of us have many assets and financialresources that we take for granted. Second, the range of financing resourcesavailable to us is so varied that few people just starting out in business knowmore than a fraction of the options available to them.

(Katz and Green, 2014, p. 488)

3.1 BorrowingWhen you decide to finance your venture with debt, where can you get access to loans tostart and grow your business?

As you might expect, your best source is the bank where you are currentlydoing business. After all, it is in the business of making loans. You are acustomer. As such, you are a known commodity – you pay your bills, you keepyour account balance positive, you don’t bounce checks. Start where you’reknown.

(Katz and Green, 2014, p. 500)

Nonetheless, the choice of the right bank can be challenging. It takes some time to findthe right bank and establish a trusting business relationship with it (Blundel et al., 2017).Usually, banks do not take a shareholding or have an interest in the business. Therefore,any capital needs to be repaid after a contractually agreed duration, and interest ischarged either at a variable rate (base rate plus a fixed amount) or a fixed rate.

It is important to remember that the bank assesses the risk and their returnwhen calculating rates and each bank will have different policies on this. Bankswill normally charge a fee for arranging financing and annually for agreeingoverdrafts.

(Blundel et al., 2017, p. 208)

Generally, we distinguish between unsecured and secured borrowing. Credit card debt isa widely used form of unsecured borrowing. Although it is more expensive than otherformal borrowing, credit card debt is very popular among entrepreneurs. This is because acredit card is easier to use and to get access to than bank borrowing. A credit card canstreamline payments and is an anonymous form of funding that does not require anyexplanation to the lender.Trading activities are often funded by an overdraft linked to a current bank account. Usingan overdraft means borrowing at a variable interest rate, with a limit that is typicallyagreed each year and for an arrangement fee. This flexible type of unsecured borrowing is




suitable for day-to-day expenses, but it can lead to high fees if the overdraft limit isexceeded (Blundel et al., 2017).Loans are a form of secured borrowing. The entrepreneur (i.e. the borrower) incurs a debtand must pay interest on that debt until it is repaid to the bank (i.e. the lender) within agiven period. The interest serves as an incentive for the bank to provide the loan. Interestrates can be subject to change and renegotiation (Blundel et al., 2017).

3.2 EquityThe modern entrepreneurial equity funding landscape generally comprises four sources:venture capitalists (VC); corporate venture capitalists (CVC); business angels andalternative sources of equity funding (Figure 2).

Figure 2 Sources of equity funding

Venture capitalistsAlthough venture capitalists tend to fund only a small number of start-ups, in practice theyrepresent the most recognised form of equity financing (especially for businesses with ahigh growth potential). Venture capitalists usually raise funds from a network of partners,such as university endowments or pension funds, and aim to provide a return to theseinvestors through selective investments in young, innovative start-ups.




Venture capitalist firms often collaborate closely with the businesses in which they invest.Entrepreneurs benefit from the guidance and advice that VCs provide. The typicalplanning horizon of a VC is about ten years. Within this period of time investors expect areturn from their investments. At the end of the funding period, VCs often exit via anacquisition or initial public offering (IPO) (Drover et al., 2017).

Corporate venture capitalistsCorporate venture capital means that an established corporation makes an equityinvestment in a start-up. This type of funding differs from traditional venture capitalbecause the funding is provided by dedicated units of corporations. These units gobeyond the primary purpose of their parent companies (Drover et al., 2017).

Business angelsBusiness angels are individual investors who invest their own money in promising early-stage start-ups. They are often former entrepreneurs, who aim to use their knowledge andexperience in their area of expertise to help other entrepreneurs to start and grow a newbusiness.Recently, business angels have become more formalised by setting up networks of angelinvestors (Drover et al., 2017). A list of UK-based business angel networks can be foundat syndicateroom.com.While some angel networks invest globally (for example, Angel Investment Network),others focus on selected geographical areas (for example, London- and Cambridge-based Cambridge Angels and Minerva Business Angel Network focus on the EastMidlands, Thames Valley, West Midlands and Yorkshire).

Alternative fundingNovel sources of funding are emerging. Among them, crowdfunding and accelerators (orincubators) have become most popular.

Crowdfunding or crowdsourcing is a relatively new form of business financingthat allows individuals to support new ventures with small contributions andtypically online. Globally by 2016, it was estimated that $34 billion was madeavailable through crowdfunding sites.

(Blundel et al., 2017, p. 215)

Two crowdfunding platforms are, for example, crowdfunder.com and crowdcube.com.Accelerators or incubators are cohort-based programmes, which provide a combination ofmentorship, work space and funding to early-stage start-up entrepreneurs in exchange forequity. One business that used accelerator funding is:

AirBnB, the famous website for finding short-term accommodation. AirBnB wasfounded in 2008. The following year, the venture was admitted to the incubatorprogram of Ycombinator. During the three months of incubation, importantstrategic changes were implemented, including the change of name fromAirbedandbreakfast.com to AirBnB.com. In the years following the program, the



https://www.syndicateroom.com/business-angel-networks

https://www.angelinvestmentnetwork.co.uk/

https://cambridgeangels.com/

http://www.minerva.uk.net/

https://www.crowdfunder.com/

https://www.crowdcube.com/


venture raised a total of $2.39B from prominent angel investors such as moviestar Ashton Kutcher, as well as VCs such as Sequoia, Andreessen Horowitz,and Greylock Partners.

(Bellavitis et al., 2017, p. 4)

Most accelerators are associated with universities. Entrepreneurs usually apply for anopportunity to develop a business idea on site during a fixed period of time (usually threeto six months). At the end of this period, cohorts of start-up entrepreneurs benefit from a‘demo day’, where they can present and pitch their business ideas to potential investors(Drover et al., 2017; Katz and Green, 2014).




4 Grants and initiativesGrants and regional and national initiatives are an increasingly important source of early-stage financing.

Using small business grants can be extremely appealing. After all, it’s moneyyou don’t have to pay back, which means no interest payments, no latepayments and no chance of losing any collateral. So, why doesn’t every smallbusiness owner forego a small business loan and take advantage of this freemoney?

(Woods, 2016)

This is easier said than done.First, to get access to a grant, you must search for and find a grant you would be eligiblefor. This search and selection process requires some personal investments in time andeffort.Second, when you apply for a grant, you will compete with other businesses for the samemoney. Thus, you must prepare a strong and persuasive application and know anycriteria, guidelines and deadlines very well.Third, if your application is successful, you will have to adhere to clear instructions on howand when you may use the money and for which purposes. In regular reports you willhave to demonstrate that you use the grant effectively, and your business may be used toshowcase the activities of the initiative providing your grant.

4.1 Finding a grantThere are several opportunities for you to identify grants that suit you. Sometimes, anexploratory Google search can provide some initial information. You can also ask familyand friends or experienced entrepreneurs for advice. Entrepreneurship fairs, such as theBusiness Startup Show, are a good occasion to meet successful entrepreneurs and learnfrom their experiences.Social media platforms are also useful. For example, you can join theSantander LinkedIn group. Santander also providesentrepreneurship and enterprise support through a dedicated support website.

4.2 National and regional initiativesSchemes for businesses that are not yet trading, or are in the start-up stage, can be foundon the Department for Business, Energy & Industrial Strategy’s website. TheEntrepreneur Handbook showcases a list of funding opportunities especially for smallbusinesses.If your business is located in Northern Ireland, you can have a look at theNorthern Ireland Business Support Finder, a database that you can search foropportunities for publicly funded support. Also look at Invest NI, the regional businessdevelopment agency.

4 Grants and initiatives


http://www.bstartup.com/

https://www.linkedin.com/showcase/santander-uk-universities-/

https://www.santander.co.uk/uk/santander-universities/entrepreneurship-business

https://www.gov.uk/government/organisations/department-for-business-energy-and-industrial-strategy

https://entrepreneurhandbook.co.uk/grants-loans/

https://www.gov.uk/business-finance-support/northern-ireland-business-support-finder

https://www.investni.com/


Grants are available for diverse types of business, such as:

● food and drink businesses (Food Enterprise Advisory Support Team (FEAST) – East Midlands)

● rural businesses (LEADing Rural Business Programme in Bedfordshire, the Chilternsand Clay Vales, Greensand Ridge, Huntingdonshire and Worcestershire)

● small tourism companies in the district of Eden● renewable energy suppliers (LCR Future Energy).

The grants address various purposes, among them cultural and social issues. See, forexample:

● Heritage Enterprise (HE) – UK – a scheme dedicated to helping communityorganisations across the UK restore neglected historic buildings and sites and unlocktheir economic potential.

● Key Fund – Midlands and the North of England – a scheme aiming to provide grantsand loans to social enterprises in the specified region to increase their communityand economic and environmental impact.

A large number of grants represent regional initiatives. Examples include (but are notlimited to):

● Grants for business growth – Stoke-on-Trent and Staffordshire – aims to supportsmall- to medium-sized businesses (SMEs) in this region that have been trading formore than twelve months and have a project costing at least £40,000.

● Future Focus and the Isles of Scilly provides small grants of up to £2,500 to purchaseequipment and resources, access research and knowledge, and subsidise salarycosts for new employees or support innovation projects started by existingemployees.

● South East Midlands Start-up Programme (part-funded by the European Develop-ment Fund) – offers access to free business start-up support to residents inAylesbury Vale, Bedfordshire, Central Bedfordshire, Cherwell, Corby, Daventry,Milton Keynes, Northampton, Thrapston and Wellingborough.

Other grants are national initiatives:

● Innovate UK is a case in point. It aims to nurture the establishment of technologystart-ups and helps them apply their innovative ideas to commercial ends.

● The Gigabit Broadband Voucher Scheme (GBVS) – UK provides grants for SMEs inEngland, Scotland, Wales and Northern Ireland that aim to upgrade businessbroadband to a high-speed capable connection.

● CRACK IT Challenges targets industry, academics and SMEs in the UK that areinterested in taking part in a challenge-led competition and in working together tosolve business and scientific challenges, such as the development of newtechnologies and their application to commercial ends and the use of animals forscientific purposes.

● The Prince’s Trust grants are suitable for young entrepreneurs (aged 18–30 years)who are seeking advice, mentorship and small amounts of money (individual grants:£1,500; business groups: up to £3,000) to start a business.



https://www.emc-dnl.co.uk/about-us/initiatives-and-programmes/feast/

http://www.worcestershire.gov.uk/info/20279/leading_rural_business_programme_leader

https://www.gov.uk/business-finance-support/tourism-grants-eden

https://www.gov.uk/business-finance-support/lcr-future-energy

https://www.gov.uk/business-finance-support/heritage-enterprise-he-uk

https://www.gov.uk/business-finance-support/key-fund-midlands-and-the-north-of-england

https://www.gov.uk/business-finance-support/grants-for-business-growth-stoke-on-trent-and-staffordshire

https://www.unlocking-potential.co.uk/existing-business/future-focus

https://www.gov.uk/business-finance-support/the-south-east-midlands-start-up-programme

https://www.gov.uk/business-finance-support/innovate-uk-grant-funding-innovation-loans-and-expert-support

https://gigabitvoucher.culture.gov.uk/

https://crackit.org.uk/crack-it-challenges

https://www.princes-trust.org.uk/help-for-young-people/get-funding-train-learn


Activity 5 Searching for a grantAllow approximately 30 minutes to do this activity

We’d like you to search for a grant that addresses both your needs and your start-up’sneeds.Before you start, you may want to consider the outcomes of Activity 1 (if you havecompleted it) and the financial situation of your business that they reflect.Produce a list of your requirements and needs for support, advice and assistance.


Based on your list of requirements, search these two websites for opportunities toapply for a fund provided by a regional or national initiative:

● The UK government’s Finance and support for your business● The Entrepreneur Handbook’s list of small business grants in the UK.

Identify and reflect on the pros and cons of the grants that you find, and describe thecriteria that your business must meet to be eligible for funding.




https://www.gov.uk/business-finance-support?keywords

https://entrepreneurhandbook.co.uk/grants-loans/


SummaryIn this unit you have reflected on funding. You have considered the importance of fundingand how you can raise funds to start your own business. You have also begun to considerthe pros and cons of different sources of funding, the uses of different types of funding,and why it is important to have effective cash flow management.You have learned:

● the meaning of the term ‘funding’● the opportunities you have to get access to different sources and types of funding for

starting a new venture and making it prosper● the importance of cash flow management● how to find and select a grant.

Congratulations on completing the unit Sources of funding. We very much hope that youhave enjoyed the unit and that the learning experience proves useful and rewarding toyou in the future.

ReferencesBarringer, B.R. (2015) Preparing Effective Business Plans: An Entrepreneurial Approach(2nd global edn), Harlow, Pearson.Bellavitis, C., Filatotchev, I., Kamuriwo, D.S. and Vanacker, T. (2017) ‘Entrepreneurialfinance: new frontiers of research and practice’, Venture Capital, vol. 19, no. 1–2,pp. 1–16.Blundel, R., Locket, N. and Wang, C. (2017) Exploring Entrepreneurship (2nd edn),London, Sage.Burns, P. (2016) Entrepreneurship and Small Business: Start-up, Growth and Maturity(4th edn), London, Palgrave Macmillan.Drover, W., Busenitz, L., Matusik, S., Townsend, D., Anglin, A. and Dushnitsky, G. (2017)‘A review and road map of entrepreneurial equity financing research: venture capital,corporate venture capital, angel investment, crowdfunding, and accelerators’, Journal ofManagement, vol. 43, no. 6, pp. 1820–53.Katz, J. and Green, R. (2014) Entrepreneurial Small Business (4th international edn),New York, McGraw-Hill Irwin.Woods, M. (2016) ‘7 Small Business Grants for Entrepreneurs’, StartupNation, 9 August[Online]. Available at https://startupnation.com/start-your-business/small-business-loans/(Accessed on 23 October 2018).

Summary


https://startupnation.com/start-your-business/small-business-loans/


AcknowledgementsEvery effort has been made to contact copyright holders. If any have been inadvertentlyoverlooked the publishers will be pleased to make the necessary arrangements at the firstopportunity.Important: *** against any of the acknowledgements below means that the wording hasbeen dictated by the rights holder/publisher, and cannot be changed.Grateful acknowledgement is made to the following source:Figure 1: Burns, P. (2016) Entrepreneurship and Small Business. Start-up, Growth andMaturity (4th ed.), Palgrave.

Acknowledgements



Documents

Sources of funding€¦ · This unit offers you an overview on funding strategies, cash flow management to sustain the growth of the venture, and traditional and new sources of funding,