The Department for Business, Innovation and Skills in the UK is launching a scheme offering loans to young entrepreneurs with a good idea. The UK government’s £82.5 million Startup Loan scheme will invite young people aged between 18 and 24 to submit a business plan and subject to approval, receive on average a loan of £2,500 to get started. The loan is repayable within five years with an interest rate of RPI plus 3%. The British Prime Minister, David Cameron has said that he wants to support young people who have a good idea and a brain for business to ‘have a go’; he hopes to rejuvenate the economy with entrepreneurial spirit.
The government body implementing and overseeing the scheme will be chaired by business guru, James Caan from TV’s Dragons Den, whose expertise and experience lies in recruitment and private equity. His enthusiasm for the scheme is inspired by the opportunity to give young people a chance, without the red tape that comes with applying for a traditional bank loan. Further guidance for the young entrepreneurs will be provided by Economic Solutions Group who will offer training in developing business plans and support in managing re-payments of the loan. This access to financial and business expertise may prove crucial to the success of those who take up the scheme.
While £2,500 may not seem a large sum, if handled carefully, it could be more than enough for a small business to get the initial boost it requires; for example it may be more than enough to start up an ecommerce website or develop new software such as iphone apps.
In these troubled times, when the government sees fit to kickstart the economy with schemes such as this one, the advantage for young business people trying to get started is that many costs such as office space and basic capital equipment are low. To stretch £2.5K to its fullest extent, expenses must be kept down as much as possible; it is important to take the time to shop around for the best deals on equipment, goods and workspace or take advantage of low cost business opportunities available on the internet. There is the opportunity to work from home. As those who take up the loan will be classified as self-employed, they will be able to claim on expenses including a percentage of their rent and bills.
Keeping up to date on outgoings and incomings will be key not only to monitor expenditure but also bring accountancy costs down when the year-end arrives; avoiding employing a dedicated accountant will help save a large portion of the funds and also force good book-keeping habits.
Prioritisation of expenditures is important and perhaps make use of the guidance offered as part of the scheme. Appealing for advice from the Economic Solutions Group on the budget, what expenses will be absolutely necessary in the first instance and what can wait until the business is up and running will be a shrewd use of the resources provided by the scheme.
By nature, entrepreneurs are creative, persistent and resilient and those qualities should be exploited; bartering, persuading and ruthlessly searching for the best deal will help to stretch the budget as far as possible. A good example is social media, which has revolutionised marketing and the opportunities that savvy business people have to spread the word about their brand or product for free. Using Twitter and Facebook as a way to direct traffic to a website as well as blogging and optimising content with keywords takes time but not necessarily money. Being active on related forums and offering an opportunity for customers to comment on a product or service is a way to get feedback and see what is popular and working well so efforts can be channelled effectively and little money is wasted.
Creating a memorable brand may be another area in which to seek advice; a unique look, style and logo makes an impression and sets a business apart and as such may be a decision to spend time and possibly money on. As with many things, a business person’s strength is in recognising their weaknesses and recruiting and delegating to the right people in those areas.
David Cameron’s scheme is supposed to encourage entrepreneurs to start small and think big. Crucial to successful growth for a small start-up is building good relationships with customers and suppliers and providing excellent service in order to build a loyal client base, whilst working hard, ensuring the means and funds available last as long as is feasible.
About the Author
Ashley Auckle works with the Abbott Clarke Partnership, independent financial advisors in South East England