Finance

8 Ways To Finance A Business In the UK – A Guide

Anita Vickers

Client Success Manager

Do you have a great business idea? Brilliant. Have you chosen a name, done your research, and written a business plan? Excellent. Figured out your marketing or advertising strategy? Great news. Thought about hiring a Virtual Assistant in the UK? Perfect! And what about finance? Have you thought about ways you could finance a business?

When it comes to starting a business, finance is one of the most important things to consider. It all depends on what your business is, what product or service you are selling, how you are going to run your business, and how much money you need to get started.

There are a lot of options out there to help you finance a business, so we thought we would take a look at a few of them here.

Self Finance

Starting a business can be challenging but ultimately a fulfilling thing to do. People usually start businesses when they are particularly passionate about something, and so, you may consider ‘putting your money where your mouth is’, so to speak.

Usually, when starting a business, it is fairly likely you would put up some of the money yourself, but how about self-financing your business? Could this be the option for you?

There are many advantages to self-financing such as having full control, not having to spend time applying to banks or elsewhere for loans, and of course, keeping full ownership of your business. On the flip side, it is worth considering the consequences if your business fails.

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Start-up Loan

One thing you won’t get with self-financing, but you would get with a start-up loan is advice and mentoring. Start-up loans are government-backed and unlike a business loan, they are unsecured personal loans.

The advantage of a start-up loan is that they have a fixed interest rate, you can borrow anywhere between £500 and £25,000 and you can repay the loan from 1 year to 5 years. You will be able to get help working on your business plan, get advice on your cash flow forecast, plus you will get 12 months of mentoring support for free once your loan is approved.

Start-up loans are a great option for those who would struggle to get finance for their business through other more traditional avenues.

Business Loan

Most high street banks offer business loans. You can either get an unsecured loan, meaning you would be liable to pay the loan back personally, should the business fail, or secured loans that could be secured against existing assets. Usually, unsecured loans have high-interest rates, so there are ups and downs to both!

These types of loans are great if you are looking to secure finance quickly, and they also allow you to stay in full control, of your business.

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Crowdfunding

Crowdfunding has gained huge popularity in recent years and for very good reason. Instead of the traditional route of getting a large amount of money from one source, crowdfunding allows you to collect small amounts of money from lots of sources.

With the rise in the use of social media in recent years, crowdfunding has been propelled into the financing field as a very viable option for many. There are a few different websites out there that you can use to crowdfund, and you can either crowdfund on an equity or rewards basis.

Equity-based crowdfunding means that for an amount of money, funders can essentially own a piece of your business. Rewards-based funding allows funders to back your business in return for a reward, usually for a product or service that your business will offer. That could be access to free services or merchandise or products depending on your business.

Most of the sites operate on an all or nothing basis, meaning you need to raise the total amount you are asking for to get the funds. If you don’t reach your total, you don’t get anything. It is certainly a great option if you have a big social media following and loyal customers!

Angel Investors

You could get your very own angel to help finance a business. That’s right, angel investors do exist! Angel investors are usually wealthy individuals who help businesses with an injection of cash once or continual assistance over a period of time. They will usually invest for some equity in your business, and they will often invest in start-ups, who are generally unable to secure other traditional methods of finance.

Photographer: Austin Distel | Source: UnsplashPhotographer: Austin Distel | Source: Unsplash

Governments Grants

There are over 70 different types of business grants available in the UK. The beauty of using a grant to finance a business over any other method is that not only do you not have to pay it back, you also do not have to give away any part of your business. This does of course mean there are many hoops to jump through to ensure you secure one.

Bank Overdrafts

An overdraft with your business bank account could be an easy option to take if you are just looking for some short term help with cash flow. The benefit of using an overdraft over a business loan is that you only pay interest on the amount of overdraft you actually use. It is wise to secure an authorised overdraft as the rates will be much lower than any unauthorised overdrafts.

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Peer To Peer lending

Peer to peer lending is often confused with crowdfunding, but there is a very significant difference between the two. With peer to peer lending, they are doing just that, lending. Crowdfunding is all about equity purchase or donation, and peer to peer lending is essentially another form of business loan.

Peer to peer lending is usually done through an online platform where private investors can lend money to businesses. Although these loans are generally unsecured, they can be fast to set up, and they can be easier to obtain, though your finances may be under strict scrutiny.

Whichever way you choose to finance a business, why not take a look at how we could help with admin support for your business!

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