Guest Blog: 5 Financing Options Available to Start-ups in Scotland

Starting up a new business in Scotland can be extremely challenging, just as it can be anywhere else in the world. The good news is that whatever field you're in and whatever your ambitions might be, there are financing options available that could offer you a real chance of seeing your ideas take off.

Here are some of the most attainable finance options on offer to budding start-ups in Scotland:

1 - Investment finance

Perhaps the most appealing way in which a new company might be able to fund its outgoings and overheads during the early part of its development is investment finance. The process involves attracting the interest of third-party investors and convincing them of the viability of your business going forward.

How much is invested and what scale of equity stake is given in return varies on a case-to-case basis but generally the investment will come along with some useful support and advice from seasoned business experts. The only downside being that your investors are subsequently entitled to a share of your company's profits - a bit like Dragon's Den, for example.

2 - Grants and loans

There are a variety of sources of both grant and loan financing available specifically to newly created companies in Scotland and you can find out more about them here. For the most part these funds are made available, either as grants or relatively low-cost loans, by organisations that are keen to see the country's small business sector thrive and create jobs.

Often these grants or loans are keenly sought after among new businesses and so the application process can be in-depth and highly competitive. But, when these kind of funding options come good, they can offer a great way to get a new company off the ground.

3 - Crowdfunding

Crowdfunding is a rapidly growing funding mechanism through which more and more small businesses from around the world are attracting finance and securing the loans they need to make profitable progress. Crowdfunding works in a way that means dozens and potentially hundreds of individuals get together, usually via the internet, to provide start-ups and small businesses loans on the basis of specified interest rates.

4 - Invoice financing

Another fast-growing alternative means of raising funds in support of small business activities is invoice financing, which essentially involves selling invoices for a fee in return for upfront cash. With mainstream lenders often reluctant to provide small businesses with loans on any scale, cash-flow can become a serious problem for start-ups and selling invoices can be a good way to keep creditors at bay when operating margins are tight.

5 - Asset finance

Asset finance is a way for start-ups and small businesses to utilise and benefit from expensive machinery or tools of a particular trade without having to bear all the cost upfront. In effect, asset finance allows companies to purchase one or a series of assets over an extended period of time as they aim to develop and become more reliably profitable.

There are other financing options available to start-ups in Scotland but these listed above are some of the most commonly relied upon. Whatever funding route you take as a fledgling company, it is important to get as much advice as you can access and to consider your options carefully before taking the plunge.

John Baird is a personal finance and insolvency expert from Scotland Debt Solutions. He specialises in advising people on how to manage their money and deal with their personal debt problems.