Raising Capital: Strategies for Securing the Funding Needed to Launch and Grow a Construction Startup

Starting a new construction business comes with many challenges and securing adequate funding is right up there with the toughest of them all. Unless you already have enough of your own money, you may find it difficult to find others to part ways with theirs. To get your business off the ground, you’re going to need to put in lots of work, get in touch with the right people, develop a business plan, and polish up your powers of persuasion.

From family and friends to crowdfunding and loans and grants, what is the best way for you to secure the funds needed to get your construction business up and running? We take a look at many of the best ways startups can secure much-needed capital.

People You Know

Often, people behind new startups try to avoid more expensive ways to get business capital and instead use their charms on family members or close friends. In most cases, somebody close is not going to demand high levels of interest. They may even take a vested interest in your business if they have experience of their own. However, this is not always the best strategy. If your business fails, you stand to lose a friend or fall out with a family member.

Angel Investing

If you have seen Dragon’s Den, then you will have a good idea of what Angel investing is. New startups receive investment and mentorship from investors that have vast experience in starting up businesses. In return, these investors receive an ownership stake in the business. There are many companies out there that will consider a business idea and offer you investment if they believe your business has a chance with their help.

Of course, there are advantages and disadvantages to this. You get to harness the business acumen of the investors and do not have to pay any money back should the business fail. On the flip side, you will have to give up a portion of your business to the investors. That is a big chunk of potential future earnings you will not see.

Loans and Grants

In decades gone by, getting a bank loan was one of the few ways to secure funding for a business start-up. You’re actually quite lucky to have so many more options these days. That said, it is not always easy convincing a bank to lend you the money you need – especially in the current climate.

You will need a stellar credit score and maybe even property you can secure against the loan. With neither of those, you will struggle to convince a bank to sit down and talk to you.

Alternatively, you can go for a grant from somewhere like The Prince’s Trust. There are a couple of problems with grants, however. For one, they are not easy to get as there are so many others in your position. For two, you’re not going to receive that much help even if you do secure one. Often you will not receive more than £5,000. In many cases, that will hardly make a dent in what you need.

Crowdfunding

Another option is to use public crowdfunding websites to build some capital. These sites have evolved slightly from what they originally were. Aside from the donations people can ask for, these sites offer different models, such as loan-based crowdfunding and rewards-based crowdfunding. The obvious downside to using a crowdfunding site is the potential for others to copy your business model or idea. Think long and hard about whether you want to share such information in public.

In Summary

As you can see, you do have a number of options you can use to help build up the required capital to start your new construction business. Each has its own benefits and drawbacks that you need to consider greatly before deciding on which course of action to take. As long as you have a solid business plan and work hard, you should be able to secure the money you need. You can then source the materials you need from UK-based construction materials suppliers, advertise your services, and hopefully start picking up your first construction projects.