Raising money to start up your business can be an important part of getting it off the ground. Finding funding can feel daunting at first, but we’ve outlined a few different ways you can try get money for your business:
Use any savings you might have
Apply for a small business loan
Try secure a small business grant
Get a business cash advance
Venture Capital funding
A loan from family members
We’ve also listed some useful things to look for when looking for an investor.
1. Use any savings you might have
Using your own personal savings can be a good option as it means you’re not relying on anyone else’s money. This way you won’t have any debt and you won’t have to give any equity away to investors.
If you don’t have any savings, don’t worry! You’re definitely not alone. Saving can be tough and starting a savings plan can feel daunting. Find out more here on how to start a savings plan that can help you kick-off saving up enough money to help fund your start-up.
2. Get a small business loan
Getting a loan can be a simple and straightforward way to get the money your business needs. Small business loans work like personal loans, with monthly repayments at a set interest rate for the loan period. Small business loans can be great for businesses who expect stable income every month.
An easy way to see how much you could borrow is through a marketplace, where you can search the market for the different funding options that you’re eligible for.
At Monzo, we’ve teamed up with FundingXchange, a funding marketplace that works with multiple lenders to find the right funding for your business goals.
Get a Monzo Business account and you’ll manage your business finances stress-free. Know when you’ve been paid immediately with instant notifications, and put money aside automatically for your tax bills with Tax Pots. Find out more about Monzo Business accounts here.
3. Try secure a small business grant
A business grant is a scheme that offers things like money or resources to small business owners and entrepreneurs.
Small business grants can be popular because you don’t usually have to pay the money back, and so it can be a great way of starting your business debt-free.
There are lots of small business grants that you can use to kickstart your business, but finding them and getting one can be a challenge because they can be very competitive.
Application processes like the Government’s Seed Enterprise Investment Scheme can sometimes be long and feel complicated, but if your business qualifies for one they can be a simple and effective way of getting your idea off the ground. The cash can also range from hundreds to hundreds of thousands of pounds, depending on the scheme.
Where to start looking for a business grant
The government site is a good place to start to see what sort of thing you can apply for
Contact your local council, enterprise partnership or other local business organisations to find out what support you can get
To qualify for a small business grant, your business might need to meet certain criteria like working in a specific industry or a location. Find out more about the small business grants you can apply for here.
4. Bootstrapping your way
Bootstrapping your business means you’re starting out with no funding.
This could be a good option for you if:
You don’t need to buy stock (it’s the type of business where a client will buy something before you actually order it)
You have website building skills to launch an online site
You don’t need to hire any employees
Bootstrapping can sometimes mean starting your company slowly with no money and then gradually scaling it up. It may not be the quickest way to your business, but it’s one of the most risk-free ones.
5. Get a business cash advance
A business cash advance is when a company provides cash in advance to a business. This is usually before any invoices and debts have been paid to them.
Here’s how it works:
If you run a shop, the company that is supporting you financially would buy a fixed percentage of your future card machine transactions at a discount. They would then transfer a lump sum into your account so you can purchase equipment or stock. They then would take a pre-arranged percentage, usually between 10-20%, of every transaction you make.
This option can be less risky than a bank loan because you won’t have to worry about monthly repayments. You also only pay back your lender when a customer pays you.
Keep in mind that some companies will need you to be taking around £2,500 in card transactions a month. They’ll also need you to have been operating for at least four months to approve your cash advance.
6. Angel investing
Angel investors are people who give financial backing to a business. They will do this in return for equity or a stake in that company.
Angel investors will often provide money to get a company up and running. They can also help provide cash to get the business or company through any tricky early stages.
Developing your investor network can be a really helpful skill. There are lots of places online where you can find angel investors but here are a few of the best places:
Angel investor networks and groups
Getting out and about at networking events can always be a good place to start too. Here’s a list of some websites that have up to date lists of different kinds of start-up events around the UK.
7. Venture Capital funding
Venture capital (VC) funds invest on behalf of either a group of investors or individual investors. They usually have specific areas they invest in, depending on their management style.
VC funds are usually quite involved with the business they invest in. This can sometimes mean the VC is an active part of the company board or it could mean that they help the business by creating introductions to different networks or people that might be useful.
Crowdfunding works when lots of people pay a small amount towards a product or idea.
The total fundraising efforts of a successful campaign will be used to get the project off the ground.
Crowdfunding can also be helpful in letting you test out whether there is appetite for your idea! This is always useful before you put money into your business and take it to market. If your crowdfunding campaign is successful, it can be great in helping to create buzz around your idea and getting more people aware of your business.
9. Community schemes
Community schemes help people and their businesses who might find it tricky to get credit from banks and other lenders.
Also known as Community Development Finance Institutions (CDFIs), they can help business owners access loans in order to buy equipment or pay for shops or office space. Find out more on the government website here.
CDFIs can sometimes have quite restrictive terms. But if you’re based in a disadvantaged area of a local community or you’re running a social enterprise, nonprofit organisations or micro-businesses, this might be a good option.
10. Peer-to-peer loans
Peer-to-peer loan websites bring together business owners and private lenders.
This type of credit is often provided with quite generous terms and some providers don’t charge early repayment fees and offer personalised rates that don’t affect your credit score!
11. Getting a loan from a family member
Asking a family member or someone you know for a loan can be a good way to get started with funding your business. A family member or someone you know will probably be quicker to approve your loan than a lender or bank might be. They’ll also usually offer you generous terms!
But mixing family and business can get complicated, so make sure you consider all potential outcomes when you’re thinking of asking a family member for a loan. Here are a few things to look out for when you’re considering whether you should borrow money.
Five things to look for when choosing an investor
If you’re getting your money through an investor, there are a few things that might be helpful to consider:
Look for the right person
Money is obviously helpful, but the right investor can give you a lot more than just cash. Ask yourself if you get on with them as a person and if they’re the sort of person you can see yourself working with for a long time. It’s important to make sure an investor is the right fit for you, as much as they’ll be deciding whether you’re the right fit for them.
2. What value can they bring to your business
It can be useful to look for investors who have relevant experience that could fill in any gaps in your business. Do they have a good understanding of your business model and industry? An investor with a good network and experience in your business area can add lots to your company, especially if they have experience in starting a similar business from scratch.
3. How much time will they’ll be able to give you
How many other boards does your potential investor sit on and how many other companies are they invested in? It can be helpful to check out beforehand how much time they’re going to be able to give you when you might need it and how easy they will be able to contact.
4. How realistic they are about growth
It’s helpful to look for someone who has realistic expectations for your growth. Unexpected things come up and it’s important to have someone who is tough enough to help you get through these times, without putting pressure on how fast you’re growing!
5. Find out as much as you can about them
Take the time to do some less traditional reference checking, like asking companies who have worked with the investor before and what their experience was like. Try to talk to companies where the partnership did and didn’t work out to get a full idea! A good reputation can really help open up doors for you too.
Keep in mind that there are risks involved in borrowing money. If you don’t make your payments on time, you could damage your credit record. You could also lose money on late fees and have to pay additional interest. Not being able to repay money you’ve borrowed could also mean getting a loan or credit in the future is more difficult!
Monzo is covered by the Financial Services Compensation Scheme (FSCS). Eligible deposits in Monzo are protected by FSCS up to a value of £85,000 per person 💰. Read more about eligible deposits here.