You have a great idea for a business. You’ve started putting a plan together. Your enthusiasm is unrivalled. You’re absolutely raring to go.
But you don’t have any money.
Luckily, there are hundreds of ways to secure funding to help get your start-up off the ground, from government loans and niche grants to high-calibre investors and organic crowdfunding campaigns. We’ve outlined some of the main channels you can pursue to get the money you need to start your small business.
Wait. Are you actually ready to start your own business?
Before approaching potential investors or applying for funding, there are a few things you’ll need, so you can present yourself as a serious applicant and set your business up for success:
Write a solid business plan
Every business needs a solid plan, which outlines everything from daily operations to future projections. It should include an analysis of predicted cash flow, as well as a financial plan that shows how you will spend the investment and how it will help your business to grow. Before starting, read our guide on how to write a business plan.
Make sure you create an actual company
Before asking for money to fund your business, you should make sure it’s officially recognised as a company by registering as:
- A sole trader: Where you’re personally responsible for your business debt
- A limited company: Where business finances are separate from your personal ones
- A partnership: Where you and your business partners are responsible for the business debts
Beyond registering your business, you could also try to get your service up and running. Even if you have limited funds, you can create a social media profile and begin to establish a brand presence. Check out our in-depth advice on digital marketing for your small business.
Have professional support at the ready
You might be an expert in your business field, but the legal and financial responsibilities of running your own business can be overwhelming for those who aren’t familiar with the details. Make sure you’re either able to learn yourself, or you have professionals on hand, such as an accountant or lawyer, who can help you understand the implications of any loans or investments you secure.
How to find money to start your own business
From traditional bank loans to creative competitions, the funding options for small businesses are seemingly endless. Whether you need £100 or £1m, new opportunities are always cropping up around the country. We’ve outlined some of the main sources of funding to help you get started.
- Personal assets
If you’re confident in your business’s financial potential, investing in yourself by taking out a personal loan or remortgaging can be a simple and quick way to generate money for your business. However, it’s important to consider what’s at stake, and make sure you can still afford to support yourself if things don’t go to plan.
- Investments from family and friends
When asking friends or family to invest in your business, it’s important to treat them like you would treat a professional investor – present your business plan, be clear about how their money will be spent, and draw up a contract that outlines repayment terms. This will help avoid any awkward disputes or issues and give them confidence in your ability to manage their money.
- Find a business partner
Beyond the potential financial benefit, going into business with a partner means you can work with someone who has skills and experience that will help your start-up grow. It’s important to find someone who you trust and are confident you can work well with.
- Banks or credit unions
You can typically apply to borrow between £1,000 and £25,000 from a bank or credit union as a small business loan. Lenders will want to know about your business strategy, as well as your credit history and existing assets, which will help them decide how much you can afford to borrow and on what terms.
- Business credit card
If you’re confident you can control your debt and meet repayments, it can be a great way to manage your cash flow while establishing a credit profile for your start-up, which can put you in a better position to secure different sources of funding in the future. However, do not seek this solution if you don’t already have an amount of money for immediate repayments as it can put you and your business at great risk.
- Business grants
Grants are non-repayable investments that your small business might be entitled to receive. There are plenty of regional, national, and European grants specifically dedicated to start-ups in all sorts of industries and sectors.
You can enter details to find relevant ones for your business with the GOV.UK grant finder, but it’s also worth doing your own online research to look for niche grants that are specific to your business.
- Government funding schemes
The government supports several schemes that are designed to help small business owners and entrepreneurs grow their companies, including:
- The Enterprise Finance Scheme helps businesses that have had difficulty being approved for a loan through other channels due to lack of security or financial history.
UK businesses can borrow between £25,001 and £1.2m, repayable between 3 and 10 years. You can apply through any of the approved lenders, who will decide if you are eligible. Though the government provides the lender with a guarantee for 75% of the loan, you are still required to repay it in full, along with any interest set by the lender plus a 2% annual charge for the remaining balance of the loan.
- A government Start Up Loan is an unsecured personal loan. You can apply to borrow between £500 and £25,000, repayable over 1-5 years at a fixed interest rate of 6%/year. You’ll also receive help with writing a business plan and a year of free mentoring, if your loan is approved.
- The Prince’s Trust
Designed for young entrepreneurs, The Prince’s Trust helps 18-30-year-olds with limited means who want to start their own business. Applicants must be unemployed or work less than 16 hours per week.
If successful, you can borrow up to £5,000, with low interest rates over a 1-3 year repayment period. You’ll also receive four hours of support each month from a local business mentor.
Crowdfunding allows you to extend your appeal to anyone and everyone. You can create a campaign online, present your business case, and ask people to invest in your start-up in return for something. It’s a flexible way of obtaining an investment, and you can be creative with what you offer in return for funding, such as one of your products to a share of your business.
There are hundreds of national and global competitions you can enter to try and secure funding for your business. Some relate to specific business purposes or goals – for example, Innovate UK runs regular competitions to help businesses who are using tech.
Beyond the chance to win a bit of money, competitions can help to provide a route into networking. They might allow you to promote your business by spreading awareness about the services you offer, as well as getting feedback from judges and other competitors.
- Angel investors
As the phrase suggests, angel investors tend to be people (or networks of businesses) with a lot of money who are willing to swoop in and invest in other businesses. They might have a soft spot for a particular idea, or see huge potential in how your start-up can factor into their wider business network.
How you obtain investment from an angel investor varies – you might meet them at a networking event or through a platform like LinkedIn. The UK Business Angels Association can be a good place to start.
- Venture capital firms
Venture capital investments are often for businesses that already have a successful track record or will be able to expand and make a large profit very quickly. Venture capital firms act as middlemen between investors and those trying to get funding, helping to find businesses that have promise and suit the investor’s interests and profile.
Applying for a venture capital investment is a demanding process that often involves a formal pitch. You also usually need a forge a connection to the firm beforehand, but if you manage to create an opportunity, it can be an effective way of gaining support from a powerful backer.
Business incubators provide an environment that is geared towards growing and nurturing start-ups. They can be either private companies or public institutions (like a university) where you move your business and share an office space with experienced people who can help you to grow and develop. It’s a great way to reduce costs up front while benefitting from the knowledge and expertise of like-minded entrepreneurs.
Having a solid business plan and the motivation to carry it through are two of the main factors to making your start-up a success – once you’ve pinned that down, you can begin to find the money to get things off the ground. Explore our Small Business Advice guides for more inspiration or have a look at our card machines & online payment gateway to find the right payment solution for your start-up.