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Financing your business


How to secure the funding your business needs

If you’re at the very start of your business journey, armed with nothing more than bags of optimism and a great idea, your next steps should be to complete a business plan and a cashflow forecast . Once you’ve done those, you may have a fair idea how much it's going to cost to set up your business and what you can afford to borrow.

At some point, you will need to find funding. Depending on the size of your company and your requirements, there are a number of options to consider:

  • Personal savings: If you don't invest in your own business, it may be difficult to persuade others to. Putting your hand in your pocket shows lenders that you are committed to your business and will work hard to make it a success. But remember, try not to invest all your savings – rainy days are not unheard of when starting up a new venture
  • Family and friends loan: Borrowing money from those close to you can be a great way to source finance. They know you, trust you and are often prepared to back you. Accepting individual small amounts from a group of people means the risk is spread and you're less likely to need security to guarantee the loans. Misunderstandings are possible, however, so it's best to define the agreement between you and your creditors in writing 
  • Grants and awards: Grants are usually one-off payments made by the government, European Union, local authority, business support organisation and charities such as the Prince's Trust 1. For more information, visit Business Link's business support finder  
  • Business overdraft: If you have a short-term or seasonal borrowing requirement, this could be a good option. It should be relatively quick and simple to arrange and you should only pay interest on the money you use 
  • Loan: Need a cash injection (to buy, say, new equipment or a company vehicle) and want to repay it over a pre-determined period of time? A loan could be for you. Just bear in mind that all banks will expect new businesses to demonstrate a viable business plan before they are considered for a loan. You may also need to provide security for larger loans. Find out more about loans from Barclays  
  • Commercial mortgage: Used to buy new business premises or release equity from an existing one. You can usually agree a repayment period of anything from 1 to 25 years and interest rates are typically lower than business loans. (Remember that your property will be at risk if you do not keep up repayments.)
  • Business credit card: Great for short-term access to credit. Find out more about Business credit cards  
  • Sales financing: Your cashflow can be put under pressure if you're faced with late payments from customers. One way of solving this problem is sales financing, which usually allows you to borrow up to 85% of the value of your unpaid invoices 
  • Enterprise Finance Guarantee (EFG): This is a government-led initiative, designed to guarantee bank loans to small- and medium-sized businesses that lack the necessary security for the funding they need. Loans of between £1,000 and £1 million are available. To find out more about the scheme, visit the Department for Business, Innovation and Skills website. Or read more about applying for an EFG   with us
  • Community Development Finance Institutions (CDFI): If you're setting up in a deprived area, you could benefit from CDFI financing. The institutions lend money to businesses that struggle to get finance from commercial banks. For more information, visit the Community Development Finance Assocation  website
  • Shareholder funding: If you've formed a limited company , you could raise some money by selling shares. But remember, this means you'll also lose out on a portion of any profits the company makes in the future
  • Business angels: These are high-net-worth individuals who invest their own money or join with others to form a syndicate. In return for funding, they take a stake in your business. Visit the British Business Angel's Association website to find out more
  • Venture capital (VC): For larger investments, companies with high growth potential could seek VC funding. Unlike business angel funding, which usually involves individuals, VC funding involves company investment. Visit the British Private Equity & Venture Capital Association website for more information


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