Start-Up Funding & Grants

Start-Up Map
Start-Up Map

It wasn't that long ago that borrowing from your bank, friends, or relatives were the only available options if you need to raise money to start your business. How times have changed!

While some high street banks are still an option for a robust proposition with match funding or the security of the equity in your home, many start-ups have found that traditional bank overdrafts and loan facilities are no longer a realistic hope.

Thankfully, the world of funding has changed dramatically over the past few years. Whereas the banks used to be virtually the only player in town, there are now numerous other options. We have tried to describe as many as possible here but please do take professional advice before proceeding with any financial commitment.

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A list of funding options is shown below but you can also read more funding related articles.

Possible Sources of Funding

Credit Cards

Whilst it is easy to identify what it’s needed for, finding the right source of finance to meet the eligibility criteria can be difficult. Below are some options to consider, what you can use them for and roughly how long it takes to arrange.

We strongly recommend that you shouldn’t overcommit yourself by taking on too much debt. Sometimes a mix of funding is the best way forward.

See: What is the difference detween equity and debt?

Savings/Own money

Using personal equity, such as savings or re-mortgaging your house can give you the freedom to run your business your way. However, it is important to draw up a business plan, mapping out when you expect to see a return and what you can afford to lose.

Bring in partners

If you’re a sole trader you could consider taking on partners to raise finance. You’ll need to negotiate what share of the profits each person will receive, agree how decisions are going to be made, and decide who is going to take on responsibility for the roles within the new business. A written partnership agreement should definitely be drawn up before you start to trade.

Persuade customers to pay upfront

Larger organisations can sometimes be persuaded to pay up front to fund a project or product you are developing if they need it for their own business. It may also be worth offering more favourable terms to customers who are prepared to pay a deposit in advance.

Friends or relatives
Friends or relatives

'Friends, Family and Fools' are a good potential source of investment because they know you and believe in your ability. However, try and keep the transaction on a business level. Explain that there are no guarantees. Friends and family must understand the high-risk nature of the venture and that there is a strong chance they might not make as much as they anticipated, or might even lose their investments completely.

Business Grants

One of the most regular questions that we are asked is "what grants are available for new business start-ups?" and the truthful answer is that there are not as many as you would think. However, as a grant does not need to be paid back, it is well worth spending a little bit of time to find out whether there is anything that you can claim. As you will discover, the business grants that do exist generally come with certain conditions. These will not be interest rates or repayment schedules but are far more likely to be related to what type of business you are starting, where you are going to be located and whether you are going to create any new jobs.

See: Are there any grants available for your business?

Re-mortgage

Releasing equity in a property to set up a business can be risky, therefore consider very carefully before putting your own home on the line.

Asset finance

There are lenders who will allow you to borrow the money, with the loan being secured against the value of the item itself.

Lease a vehicle
Lease finance

Often used for vehicle finance. The interest rates can be high, but you’ll get a quick decision.

See: To lease or not to lease, that is the question.

Personal loans

Interest rates vary dramatically depending on the applicant’s perceived risk profile. You can do this online and get instant decisions.

Business loans

Available from the main banks and online finance providers. They’ll ask you to provide a business plan and a financial forecast. The interest rate can be anything from 4% (usually only with secured loans) to 20% on unsecured loans.

See also: Increase your chances of being approved for funding.

Government start-up loans

Some countries have government backed loan schemes to support new business start-ups. They are treated as unsecured personal loans. Typical time scale is 2 weeks from the submission of your business plan and financial forecast to get a decision.

Overdraft

Interest rates can be quite high though and is charged per day you use it, so it’s best not to rely on this option for long term finance needs. It can take a week to get approval for an overdraft.

Business Credit cards

Again, not a good way to borrow long term, but great for short term funding and you’ll get a quick decision with the card despatched and live within a week.

Supplier/trade accounts

Often this will mean that you do not have to pay for the item upfront, but can delay the outgoing payment. This is great for businesses who are awaiting invoices to be paid.

Invoice discounting/factoring

Allows you to access the value of your invoice before your client has paid it. This can effectively plug cashflow gaps. Charges vary from one supplier to the next, so you’ll need to get quotes from several and understand how each service differs first.

Investors

Someone may wish to put money into your business in exchange for shares, profit share or a directorship. You will usually need to produce a business plan or ‘pitch deck’ to attract their attention.

Business Angels

If you have a business idea which needs to grow quickly and has a good chance of making sizeable profits, you may be an attractive proposition for a Business Angel. As well as investing their own money, you will also acquire their expertise and ready-made contacts and reputation (good or bad so make sure that you choose wisely!).

See: What are Business Angels?

Image of Angel Investors Copyright Disney Television
Crowd funding

This is the fastest growing type of funding. It does involve a bit of effort on your part in writing up a campaign, publishing and sharing it on social media. There are lots of different websites/platforms on which to publish your campaign.

Peer lending

This is an ‘any purpose’ loan where individuals or businesses put surplus funds in a ‘pot’ and applicants can then apply for funding from that ‘pot’. Decisions are quick and interest rates are determined according to risk.