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How to find funding for your startup

The number of savvy Britons starting their own businesses is soaring.

Around 373,632 new businesses have registered with Companies House so far this year. Last year the figure hit a record high of 520,000 with the vast majority – 95% – registering as small ventures launched by individuals.

There’s plenty of opportunity for Britain’s growing vanguard of entrepreneurs – but before you get too giddy over your next big business venture, it’s wise to think about how you’re going to fund it.  Getting the right financing in place early can help you set up your company faster, and more securely.

But where should you look? Here’s a quick guide to help you get the most out of the options available

Grants and Loans

The Government’s Start Up Loans scheme, which was originally aimed at young entrepreneurs, has been opened up to business people of all ages. Now anyone over the age of 18 with a killer concept can apply for loans of up to £25,000 to help get your business started.

The Government also run the Enterprise Allowance Scheme, which is aimed at those on Jobseekers’ Allowance or lone parents, offers up to £1,274, payable over 26 weeks, and also includes business mentoring and support. As of March 2014 the scheme had helped around 46,000 new businesses, 10,610 of which were started by people over the age of 50, and 8,590 by people with disabilities.

Elsewhere, the Seed Enterprise Investment Scheme (SEIS) allows business investors to claim generous tax reliefs on funding of up to £100,000, making you a far more attractive option for investment. To qualify you must have been trading for less than two years.

Organisations such at The Prince’s Trust offer support for young entrepreneurs, while the Prince’s Trust for Mature Enterprise assists those over the age of 50. Local authorities also provide schemes aimed at start-ups in their area – for example, our local Brighton and Hove Chamber of Commerce  chambers recently launched the Business Navigator Growth Hub, which offers free advice and support to local businesses. You can search for schemes local to you using the Government’s Business Finance and Support Finder.

Additionally, blue-chip companies offer funding across a variety of sectors. Better business finance will help you find the right financial support to meet your business needs; they also host nationwide events aimed at startups and small businesses.


Crowdfunding allows you to bypass traditional forms of business finance and pitch your idea to a wider audience.

According to Nesta, the charity that supports innovation in the workplace, in 2013 crowdfunding sites helped small businesses raise more than £500 million. Crowdfunding has been used for a range of wacky ideas – notably this guy, who has raised over $55,000 to make a potato salad. Dreams do come true.

Just last week, London usurped San Francisco to become leader in peer funded campaigns – the UK’s capital launch on average 12 new crowdfunding projects per day.

There are a variety of sites offering different methods of funding:

  • Crowdcube and Seedrs enable investors to buy an equity stake in businesses.

  • Through Kickstarter, wannabe businesses receive backing from supporters who want to see that project succeed. It functions on an all or nothing basis, so creators only get the money that has been pledged once their funding goal and deadline has been met.

  • Funding Circle, Rate Setter and Thin Cats (the opposite of fat cats – get it?) enable investors to offer short-term loans to businesses, which carry an agreed interest rate and pay-back period.

Borrowing from friends and family

Borrowing from friends and family is an incredibly common way to start a business, be it a few hundred pounds for a laptop of tens of thousands in exchange for a chunk of equity. It is important to treat this in the same way you would treat any other approach to funding. You will therefore need to:

  • Prepare a business case: Specify how long you need the money for and explain how their funds will be used to grow your company. You will need to convince them to invest in the same way you would for any other grant or loan.

  • Present a business plan: This should be as tight as possible prior to your meeting and should outline exactly how their investment will be used and what their expected return will be.

  • Always ensure you document the business agreement: It is much easier to go back on spoken terms between friends and family, so it is vital to have them in writing. Both parties must sign the document complete with the loan terms and repayment agreement.

Bank funding

Many startups and SMEs turn to large banks when looking for loans by default, even though the process can be time consuming and the rejection rate is around 50%. However, smaller banks such as Shawbrook, Aldermore and Metro Bank are attempting to tackle the monopoly enjoyed by UK High Street banks, and can offer more attractive packages. These can include free business banking for an introductory period and personalised business finance advice.

Earlier this year, the Forum of Private Business highlighted how many small businesses and startups shy away from bank loan requests due to a fear of rejection. Phil Orford, the FPB’s Chief Executive, said:

“Banks are keen to stress they have money to lend and the Forum of Private Business continues to urge businesses that money is there to borrow at present, either through the main or challenger banks.”

The Government is also going some way to offer support and guidance for startups who have been refused a loan from big banks. If you decide to turn to a bank for your financing, it’s worth shopping around.

How to prove your eligibility for loans

Typically, in order to apply for business funding you will need to prepare the following:

A business plan

The business plan contains details of your entire business operation, together with a brief financial summary. Typically the key sections in the business plan are (although not all will be relevant, depending on your business):

  • Advisors & shareholders

  • Background

  • Management

  • Strategic Partners

  • Technology

  • Products & Services

  • Competition

  • Routes to Market

  • Intellectual Property, patents & trademarks

  • Mission

  • Sales & Marketing

  • Strategy

  • Progress to Date

  • Operations & overheads

  • SWOT Analysis

  • Investment Proposal

  • Financial Summary

  • Use of Funds

A financial forecast

This usually consists of a 3 to 5 year financial projection. This should analyse how your business is likely to succeed, take into account any milestones, costs, and the price and cost of products and services.

Try to ensure the number you record are as realistic and credible and possible.

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Getting the right startup funding in place early can help you set up your company faster, and more securely. We take a look at the options available to you.

If you’ve got a feasible business plan, you might be entitled to a weekly allowance worth up to £1,274 over 26 weeks.

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