11 ways you can get funding for your business

Raising money to start your business is an important part of getting it off the ground. Finding funding can feel daunting at first, so we’ve outlined a few different methods:

We’ve also listed some useful things to consider 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 or have to give equity away to investors.

If you don’t have any savings, don’t worry! You’re definitely not alone. Find out how to start a savings plan that can help fund your start-up.

2. Get a small business loan

Securing 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 good for businesses that expect a stable income every month.

3. Secure a small business grant

A business grant is a scheme that offers things like money and resources to small business owners and entrepreneurs.

Small business grants are popular because you don’t usually have to pay the money back, so they 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 getting one can be a challenge because they can be very competitive. The government’s Seed Enterprise Investment Scheme is one example. If your business qualifies, you can receive a maximum of £250,000 to get your idea off the ground.

The amount these grants offer can 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 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 without funding.

This could be a good option for you if you:

Don’t need to buy stock
Have website building skills to launch an online site
Don’t need to hire any employees

Bootstrapping can sometimes mean starting your company slowly and then gradually scaling it up. It might not be the quickest way to start your business, but it’s one of the most risk-free methods.

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’s supporting you financially would buy a fixed percentage of your future card machine transactions at a discount. They’d transfer a lump sum into your account so you can purchase equipment or stock. They’d then 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 only pay your lender back when a customer pays you.

But keep in mind that some companies will need you to be taking around £1,000 in card transactions a month to qualify. 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 do this in return for equity or a stake in the company.

Angel investors often provide money to get a company up and running. They can also help provide cash to get the business or company through tricky early stages.

There are lots of places online where you can find angel investors such as AngelList and LinkedIn.

Getting out and about at networking events can also be a great place to start. Here are some websites that have up-to-date lists 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 businesses 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.

8. Crowdfunding

Crowdfunding is when lots of people pay towards a product or idea. The total fundraising efforts of a successful campaign will then be used to get a project off the ground.

Crowdfunding can also be an effective way of testing out whether there’s appetite for your idea. This is always useful before you put money into a business and take it to market. If your crowdfunding campaign is successful, it can help to create buzz around your idea and make more people aware of your business.

9. Community schemes

Community schemes help people 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.

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 organisation or micro-business, this might be a good option.

Find out more on the government website.

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.

Find out more about peer-to-peer loans here.

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 funding for your business, as they’ll probably be quicker to approve your loan than a lender or bank. They might even offer you more generous terms!

But mixing family and business can be complicated, so make sure you consider all potential outcomes if you’re thinking of taking this route.

Here are a few things to look out for when you’re considering whether you should borrow money.

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 you can see yourself working with them 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.
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 field can add lots to your company, especially if they have experience in starting a similar business from scratch.
How much time 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’s a good idea to work out beforehand how much time they’re going to be able to give you and how easy they’ll be to contact.
How realistic they are about growth: look for someone who has realistic expectations for your growth. Unexpected challenges can come up and it’s important to have someone who’s tough enough to help you get through these times, without putting pressure on how fast you’re growing.

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.

If you're a sole trader or a small business your eligible deposits may be protected by the Financial Services Compensation Scheme (FSCS) up to £85,000. To learn more about the businesses and deposits that are eligible, see here.

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