This guide explores the implications of using public funding or private

finance as sources of financing your projects, organisation or

business. It includes information on:

General guidelines

Bank finance

Business angels

Sponsorship

Public funding

Crowdfunding

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Ideally your work will generate enough income to finance its delivery

and ongoing development, and sustain you and your aspirations. It

may be easier to identify a direct income for some aspects of your

work than others: you may be looking at a range of work and

services so elements that are not income generating (but are vital to

the profile and development of your practice / business) can be

subsidised by other activities.

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However, you are still likely to need finance to:

• develop your project

• sustain your venture until it is in a position to generate its own

income

• subsidise activity that won’t create revenue

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Before you invest time and energy in planning your venture, consider

how others will value your work and identify who will buy and / or

fund your idea. Our Costing & Pricing Work guide will take you

through some of the issues involved in putting a value on your work

to help predict income, and the links within the Funding & Finance

section of our website can help you identify suitable funders. Try to

identify a range of clients and / or funders so that you are not reliant

on one income stream.

General guidelines

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To attract finance you will probably be expected to show some

level of outlay yourself, complete an application process and

support your application with a plan. It is much more difficult to

get others to commit money to your idea if you don’t:

• demonstrate any investment from yourself or others

• articulate exactly how the money will be invested

• detail what the investor / funder will get in return for their

contribution to your venture

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For your own sense of security and the confidence of your backers,

you will have to prove that you can make a return on the investment

you are asking for.

You will need to figure out how much income your venture can be

expected to make and present this information in the form of a

budget and a cash flow forecast.

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The most common forms of investment are:

• private investment and sponsorship

• personal investment: equipment, assets, security, cash, equipment

from private sources / friends and family / partners / shareholders

• other investment: bank finance (overdraft, loan, enterprise finance

guarantee), business angels, sponsorship, in kind support

• public funding: European, UK and Scottish government, local

authorities, Creative Scotland, Scottish Enterprise, Business

Gateway, Chambers of Commerce, Lottery funds

• grants and awards: charitable trusts and foundations 7/31

Before approaching any funders or investors it is important to:

• Ensure that you have protected your ideas as your Intellectual

Property.

• Ask yourself why you should invest in each funder – assess the

benefits and downfalls of each funding opportunity individually

and ensure that the offer is suitable for you and your business.

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Finance options available through banks include:

• overdrafts

• credit cards – advisable for businesses wanting to borrow a small

amount, i.e. less than £5,000

• loans

• Enterprise Finance Guarantee – supported by the Department for

Business Innovation & Skills with lots of paperwork to prove that

your application is viable

Bank finance

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When approaching a bank manager for funding or finance, there are

two main criteria with which they will judge your application:

• risk assessment of your business

• ability to repay your finances

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When approaching the bank:

• Have a business plan drafted, but preferably completed.

• Remember, if a manager understands your business, he or she is

more likely to support it.

• Ensure that your business plan is in a language that your bank

will understand – do not include technical jargon. This might mean

that you have a business plan for potential funders in clear

business language, and another for potential creative partners

which uses more specialist terms. 11/31

• Your business plan should include economic industry analysis

and social trends.

• Your bank manager will want to assess the competitive quality of

your business – why is your business going to succeed above

others?

• Your business plan should detail a strong management team or

allude to the fact you intend to develop one. This could be implied

simply by identifying peers that you intend to involve in an

ongoing evaluation of your business.

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Bear in mind that banks make decisions on a purely financial basis.

Don’t be discouraged if you are knocked back, keep trying.

Sometimes you have to revise your business plan or present yourself

differently for the bank to want to invest in your business.

When deciding on the amount of finance to request, consider:

• Where your repayments are going to come from?

• Whether you are able to offer any personal contributions to match

the funding?

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• Do you understand your own financial accounts, the forecasting

and analysis well enough to discuss them openly?

• Have you factored in any security that you might have available

to underwrite a loan?

Realise that your financial accounts are for your use, not the bank

manager’s. They should give you confidence and must demonstrate

that your business is viable.

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• part ownership of your organisation

• joint ownership of your organisation

• involvement on the board of directors: memorandum and articles /

investment agreements / contract of employments

• that you register as a Limited Company

Business angels

Business Angels (BAs) are certified investors who put their own

capital into your business. BAs will want to be involved in your

business so this option is not advisable for owners of businesses

who want complete autonomy. They would normally expect one

or more of the following in return for their investment:

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Bear in mind that:

• BAs take risks investing so need to know that you have a focused

business and marketing plan.

• BAs receive hundreds of applications so make your business plan

stands out to ensure it is read. Out of 100 business applications

received, only 10 are considered and only 2 or 3 are invested in.

Make your business unique and sell its unique factors otherwise

BAs won’t be interested and won’t invest.

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• Be creative with your marketing: create an interest in your

business before you’ve even launched your business plan.

• BAs are interested in Small to Medium-sized Enterprises (SMEs)

that have a high potential for financial gain. They will generally

expect their capital back after 3 years or at least expect a review

of their profit return.

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To get sponsorship, you are expected to have a focused marketing

plan or idea of how your project is going to succeed. You should be

able to describe how your project, marketing, audience and / or client

group fits with a potential sponsor’s marketing needs, e.g. where and

with whom their profile will be raised.

It is best to establish a relationship with all possible sponsors. They

do not often appreciate being asked for money for one-off instances

as they like to know that they are investing in a viable and ongoing

project: where single events are part of a bigger plan and they can

be involved in the growth of an individual or entity.

Sponsorship

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Sponsors will expect you to be able to give them an exact figure of how

much you need in sponsorship, the exact reason you need it

(equipment, travel, marketing, fees, production costs etc.) and who

else you are going to target for money. Some businesses also demand

that they be the only sponsors in a certain sector so as to avoid

competition.

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Public funding in the form of grants and loans are popular sources of

start-up and project funding. Most funding from public sources, trusts

or charities is dependent on your individual circumstances, those of

your project or business as well as those of your audience / client

group. Each funding scheme will have different criteria and usually

fund a proportion, rather than the full costs, of any project. Do be

prepared to commit yourself to a fair amount of research if you intend

to pursue funding from these sources.

Public funding

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Be aware that the competition for this type of funding can be high and

many funders are risk averse and therefore want to know that they

are going to get the best value for their (public) money, that the idea

is sound, fits with their aims and will be carried out reliably and

competently.

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You can use the following questions as a checklist before making an

application:

• What do you want finance for?

• What are the funder’s / financer’s aims and requirements?

• How does your venture and circumstances meet them?

• What are you investing?

• What support do you already have?

• Can you get finance / support elsewhere or by other means?

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Public funders will most likely ask for evidence of match funding. By

this they mean that they would like to see evidence of other sources

of finance that you (and others) are investing (e.g. personal

resources, bank loans or grants) to match their investment. The

match funding should be real money but may also include some ‘in

kind’ support, e.g. the value of resources loaned to you at no actual

cost, the value of hours contributed to your project voluntarily by

supporting organisations.

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If you intend to apply for funds from a trust, local authority or any

public body to help it achieve its aims, some of the questions asked

will include:

• Who are you?

• How long have you been in existence?

• What are you aiming to do?

• What is your financial responsibility?

• Who is responsible for decisions? 24/31

These questions can be answered succinctly within a written

constitution of an organisation. Some funders require that your

business operates within a specific type of legal structure which

provides an accountable management structure and many funding

schemes are aimed at organisations rather than individuals. It is up

to you to decide how much you want your business to be defined by

the funder’s criteria but it is better to make decisions about your legal

status and objectives based on the functions and needs of your

business rather than be steered by your choice of grant. Try not to be

rushed into hasty decisions.

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Ask yourself:

• Would you be happy with the same structure and objectives if you

didn’t get or need that particular fund?

• Will your options and creativity be limited by funding obligations?

• Will you be able to manage the additional administrative costs

and paperwork?

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Many funds have strict application deadlines so do not leave your

funding search too late. As soon as you begin to establish your

business objectives start to investigate your finance and identify your

need for funding or other investment.

Cultural Enterprise Office can help you, through one-to-one advice

sessions, to weigh up the general implications of different funding

strands. However you will be required to do much of the research on

your own as it affects the future shape of your practice and requires

very personal evaluation and decisions.

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Crowdfunding is the term used to describe the collective support of

many who invest or donate a sum of money to help get a particular

idea (or project) off the ground. It promotes the idea of raising a large

pot of money from lots of little investments, which can take the form of

advanced sales.

Like all donation and sales campaigns, good marketing is essential to

this way of raising money.

Crowdfunding

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As the name suggests, you need a crowd to make this viable so it’s

best suited to projects with:

Ideally you have all of the above.

• a strong message and wide appeal, or

• where you have a good network of peers, or

• an established audience / fan-base

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Essentially you are asking your audience or peers to invest in you so

make sure your project description is clear and concise.

Outline your objectives, what the money will go towards and describe

those who may benefit from the project / activity.

Be clear about what you are offering in return and ensure you can

deliver on the promise, so you can increase the goodwill and

anticipation for your next project.

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For further information on this subject, please refer to the

following resources:

Making Applications & Proposals

Budgets Guide

Cash Flow Guide

Where do I find out about fundraising and sponsorship?

An Introduction to Crowdfunding

Next steps

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Disclaimer: Cultural Enterprise Office is not responsible for any advice or information

provided by any external organisation referenced in this document.