Gillian Bevis from This is Money replies: If you have a bright idea for a new business venture, the first thing you should do is get it protected.
If the business centres on an invention, you should patent the product and if it is an ‘intellectual’ idea for example selling photography or producing literature copyright is your protection.
Patenting isn’t necessarily cheap but is worth it in the long run. Patent Office fees will cost around £200 from initial filing to a patent being granted. The process can take up to 33 months, or you can opt for the fast-track system.
Drawing up patent documents is a skilled job, so it is usually better to use a patent agent, who will charge between £600 and £1,000 for a simple invention. For more information on patenting and for contact details of the Patent Office, read our guide to protecting small business ideas.
After you have written a business plan and chosen an appropriate business bank account, raising finance is usually the next step.
Typically there are four common sources of money: Friends, Family, Founders (you and your fellow entrepreneurs) and Fools in other words people prepared to take a calculated risk and stump up the cash. If these avenues don’t prove fruitful, you can turn to commercial lenders.
Since the recession took hold, banks have been criticised for failing to lend to small businesses but that doesn’t mean raising money is impossible. Around two thirds of all businesses rely on the bank for funding but there are disadvantages to this method of finance.
For example most banks will lend you money against some form of security usually your house and if the business doesn’t work out, the bank could then repossess your home.
Banks will normally lend up to £100,000 for a small business. For larger sums you need to call on the specialists such as venture capitalists, sector-specialist investors, business angels or incubators.
Business angels essentially work along the same lines as BBC’s Dragon’s Den. ›› Find out how to get on the show.
Business angels are often entrepreneurs or retired executives, using their own resources, who invest in lump sums in return for a stake of the company.
They differ from major venture capital firms who tend to have high minimum investment levels. A typical amount a business angel would be prepared to put up would be £30,000.
With no formal procedures, angels can often make much quick decisions than say, a venture capitalist. Businesses operating in almost any sector are eligible for this kind of funding.
A potential investor will want to back a firm with serious growth potential, rather than the so-called lifestyle businesses designed to provide a comfortable living for the owner.
Universities, further education establishments and business schools have incubator schemes which help new businesses get off the ground. They proved a popular method of finance during the dotcom boom, attracting vast sums of money from venture capitalists.
Some still have modest sums to lend and can provide funding or practical help with IT, accommodation, telecoms and even legal and accounting back-up.
They will also have specialist staff who can help guide you towards making the most of your business, put you in touch with experts that you need and help raise finance.
Lastly, grants can be obtained from Business Link and other local development agencies. Some grants provided by the Department for Business Innovation and Skills (BIS) can amount to tens of thousands of pounds.
The European Union also have various cash schemes in place for small businesses.
INSIDE EMPLOYMENT LAW: EXPERT ADVICE
- Parental leave
Changes to maternity and paternity leave
- Payout blackout
Can bonuses be withheld?
- Discrimination
How to promote equality
- Religion
Workplace rights
- Safeguarding
New rules on working with children
- Data Protection
Playing by the new rules
- Grievances
How to prevent a picket line
- Recession
Cut pay with caution
- Standoff
Can employees reject a pay cut?
- Temp workers
Agency workers getting the push
- New rules
Holiday accrual on sick leave?
- Failure
Dealing with administration
- Equality
Laws on positive discrimination
- Temps
Can they cost you more?
- Age concern
Force retirement at 65?
- Illegal staff
10,000 fine for each worker
- Pay gap
Gender pay gaps revealed
- Takeovers
Legal stance on mergers
» « click to reveal more »
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