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Start Up Funding

The idea of setting-up a business appeals to many people. But to turn the dream into reality takes money. And, if the business takes off, you’ll probably need financing to grow it.

Start Up Funding Overview

There’s a wealth of financing options available, but which is best for you, your business and your current situation? You may find you need to use more than one way to raise money for your business. Let’s take a look at the various options:

  • Crowdfunding. Crowdfunding is a way of raising money by asking a large amount of people to each invest a small amount of money
  • Angel investment. This is when an investor makes use of their personal disposable finance to provide equity finance to a business
  • Friends and family could be option
  • Start-Up Loans from a bank or other financial institution
  • Grants – Are there any grants you could claim?
  • Bootstrapping – where you use your personal income and savings to support the business. This may only work very early on when there’s no or limited team costs. Interestingly some of the world’s largest companies started out as bootstrapped ventures.
Equity Crowdfunding

Investors view business pitches via an online platform. The business decides the amount they need to raise and the amount of equity that they’re prepared to give up securing it.

Angel Investors

These are high-net-worth or sophisticated individuals looking to invest in a portfolio of other businesses.

Venture Capital

At this stage, the business model will have been proven and the focus will be on looking to scale. So, a typically funding is £200,000 and upwards.

Grants

If you’re developing a product or service, you may be eligible for a grant. It might be worth taking a look at the Government’s Finance and Support for your Business site and perusing the options that are currently available. For a detailed list of grants available, broken down by region and industry.
Some universities also provide grants that are usually designed to help early-stage spin outs or to fund research. But, note that grants often involve a lot of hard work and time to secure.

funding

Debt Financing

If you need money and can demonstrate a reasonable cash flow, debt financing may be most appropriate. This can take the form of:

  • Bank loans – These fall into two types. Unsecured business loans are typically taken out from a bank or building society. The amount they can provide and the interest you’re offered will depend on your personal credit rating and the creditworthiness of your business. Because this type of loan isn’t secured against your home or business, the amount you could borrow will probably be relatively small. To borrow more, you may consider a secured business loan. A secured business loan can be secured against your home, stock you’re purchasing, and on the assets belonging to the business. Depending on the assets you can put up as security and your circumstances, you may be able to borrow substantial amounts.
  • Government-backed start-up loans – If your business is just getting off the ground, it’s worth looking into government-backed schemes to find out if you’re eligible for any start-up loans. is a government-backed scheme that’s designed to help people start or grow a business in the UK. As well as a loan, you may be able to get free mentoring.
  • Peer to peer lending (p2p)– The loan comes from private lenders and firms. This type of loan is carried out through an online platform. Some, such as Funding Circle, lend from £5,000 to £1 million. A more competitive interest rate on borrowing is usually offered than banks can provide. And, the funds are usually paid a lot faster than if you went through a bank. Once approved, they can generally be paid out within two weeks.
  • Invoice financing – If you need money right now rather than in a few months when a large invoice is due to be paid, invoice financing may be appropriate. With invoice financing, a third party ‘buys’ your unpaid invoices from you and lends you money against their value. There are two types: factoring and invoice discounting. With factoring, the invoice financier (such as Market Invoice) collects the money owed to you by your customers. With invoice discounting, the invoice financier lends you money against the value of your unpaid invoices, but you collect the money from your customers as usual. You then use this money as it comes in towards repaying your loan. Best for well established companies that have a bit more financial certainty.

 

Equity Crowdfunding

Investors view business pitches via an online platform. The business decides the amount they need to raise and the amount of equity that they’re prepared to give up securing it. The platform works on an ‘all or nothing’ basis, so no funds will be released unless the target is met. Typically, you’ll attract a large number of investors and build your brand awareness because a raise may generate a lot of social media and press coverage.

Angel Investors – best for early/mid stage

These are high-net-worth or sophisticated individuals looking to invest in a portfolio of other businesses. As well as helping to raise money for your business, they offer to share their expertise and contacts.
Think along the lines of Dragon’s Den…

Venture capital– best for mid/later stage

At this stage, the business model will have been proven and the focus will be on looking to scale. So, a typically funding is £200,000 and upwards. VCs can manage investment from a wide range of investors, but may also be investing on behalf of pension funds. Be prepared for a high level of scrutiny. Also, VCs may demand a high level of involvement in your business to help drive growth and see a return.

Which Route Is Right For You To Raise Money For Your Business?

It’s not easy to decide which option to go with to raise money for your business. You may end up going with a combination of the above, or go down a few routes as your business progresses but hopefully you have a more informed choice after reviewing all the available options.

Find the Best Start Up Funding

Starting a new business do you need funding?

Exciting Futures  was created as an all-in-one solution by bringing together the tools or services you may need to run your business! When you map out your business model, start up funding may be one of the overall parts your business needs to review if required and next steps.

Next steps for start up funding

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