How to ask money for

You want it. They’ve got it. But how do you get it from their pock­ets into your busi­ness? Read this…

Cosmopolitan (UK) - - Earn -

Got an idea for a kick-ass life­style app, but you’re too afraid to ask your minted twice-re­moved aunt for a loan? Wel­come to the world of anx­i­ety-in­duc­ing start-ups. The big­gest bar­rier is of­ten a lack of cold, hard cash to get the ball rolling. Know­ing where to go, who to ask and, cru­cially, how to ac­tu­ally ask for it could be the only thing stand­ing be­tween you and that su­per-yacht you’ve had your eye on. But there is good news: with a bit of care­ful plan­ning, you’ll be giv­ing Ari­anna Huff­in­g­ton a run for her money in no time…

Re­ally? Is this a se­ri­ous op­tion? It’s pretty much win-win: not only do you get the in­vest­ment you need, but it’s a great mar­ket­ing tool – and works es­pe­cially well for con­sumer-fac­ing busi­nesses. It did the trick for Bor­rowMyDoggy, new bank­ing app Monzo and street food start-up Lon­don Union: all three have raised over £1 mil­lion this way.

Get the cash You need to crank up the ex­cite­ment – but also break down ex­actly where the money is go­ing, and how it will ben­e­fit the busi­ness – so donors know why you’ve set that tar­get. Perks such as be­ing the first to try the prod­uct or hav­ing their name on the pack­ag­ing help. It’s also best to ask friends and fam­ily to do­nate on launch day – so early view­ers aren’t put off by it ap­pear­ing as if there’s no in­ter­est. Stuck? Crowd­fund­ing con­sul­tants such as TribeFirst and Crowd­fundMe2 will fine-tune your page – for a cut of the money raised. Sounds good, but where should I go? “Dif­fer­ent plat­forms have dif­fer­ent strengths,” says Emma Watkin­son, CEO of on­line fash­ion bou­tique SilkFred, which raised £145,000 through crowd­fund­ing. What does that mean, ex­actly? Well, if you’re fund­ing a prod­uct such as art, where you can ef­fec­tively pay peo­ple back through con­sumer con­sump­tion, Kick­starter or Crowd­fun­der is ideal. If you’re rais­ing cap­i­tal to scale a whole busi­ness, you may need to of­fer peo­ple eq­uity, which calls for a plat­form such as Crowd­cube (UK mar­ket leader in eq­uity crowd­fund­ing).

And fi­nally, a golden rule… You have to grab po­ten­tial in­vestors’ at­ten­tion – and keep it. No easy feat on­line, where mil­lions of other dis­trac­tions are just a click away. This means you have to have a great story – that’s ei­ther about your­self, your com­pany or who your project will have an im­pact on. Tell this via video: it can dou­ble suc­cess rates for re­ward cam­paigns. “Ex­pe­ri­ence and recog­nis­able names are also im­por­tant,” adds Watkin­son. Are you start­ing a fash­ion busi­ness af­ter five years work­ing at Burberry? Men­tion that. Strangers need to see you’re worth their hard-earned cash.

Sounds re­fresh­ingly sim­ple… In one sense it is, but you need a good credit rat­ing (you can check this for free with com­pa­nies such as Ex­pe­rian and ClearS­core), and it’s not unusual to be asked to pro­vide a per­sonal guar­an­tee. Trans­la­tion: they could force you to sell your home to cover the loan if the busi­ness goes belly-up. Scrap that – sounds ter­ri­fy­ing. It’s cer­tainly a risk – es­pe­cially when you’re crouched in the start­ing blocks ready to sprint.“Debt does not suit early-stage start-ups, re­gard­less of the cur­rent cli­mate and the ap­par­ent lack of propen­sity to lend,” says Perks. Are bank loans a no-no then? For tech ven­tures: yes. Phys­i­cal prod­ucts? Not nec­es­sar­ily. As Mur­ray ex­plains, banks are use­ful “if you can demon­strate that you can make money back in a year”. For in­stance, if you’re mak­ing shoes and need £50,000 to get up and run­ning, as long as you can demon­strate to the bank that you can sell enough to pay off the in­ter­est, the money’s yours. Are there bet­ter al­ter­na­tives out there?

Plenty. The gov­ern­ment’s Start Up Loans scheme of­fers un­se­cured loans of be­tween £500 and £25,000 at a flat in­ter­est rate of 6% from one to five years, which come with free men­tor­ing for 12 months. The Prince’s Trust also helps un­der-thir­ties get fund­ing, too. There are also sec­tor­spe­cific grants, such as the ones awarded to en­ergy start-ups by Shell’s Smarter Fu­ture Pro­gramme.

Dar­ling, look how rich we are! At last! We can fi­nally buy that BDSM dun­geon

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