The Definitive Guide to Raising Finance for Business

Business Grants

Small businesses in the UK are really lucky when it comes to the availability of business grants. The first port of call for many newly established companies, there are loads of grants on offer in the UK that can offer you financial assistance with no need to pay anything back. Some of these are small business grants, whilst others are only available to firms that have been going for a few years.

Prince’s Trust Grants

Launched in 1976, this program aims to help young entrepreneurs get their businesses off the ground. In addition to funding, you can also find mentors to advise your company through this scheme. Those between the ages of 18 and 30 are eligible – you can apply on the Prince’s Trust website.

Innovate UK

If your business has come up with an innovative solution or new technology, then Innovate UK could offer you a grant of between £25,000 and £1 million. They’re open to all forms of innovation, although technologies relating to artificial intelligence and data, ageing society, clean growth, or the future of mobility are especially welcomed. Check out Innovate UK here.

Media sub-programme grants

Organised by the European Commission, this scheme is open to creative businesses in the film, television, new media and video games industries. You can check out the latest available funding opportunities on the Creative Europe UK Desk site.

Transport and Logistical Efficiencies

Transport and Logistical Efficiencies (TALE) offers support, workshops, and grants to businesses that are involved in transporting commercial goods in the UK. You can get a grant of between £1,000 and £60,000 towards a data-centred project such as bringing in new software or developing a new type of product. TALE can help you out with a grant of anywhere up to 40% of the total project cost. Find out more about the organisation here.

Local Grants

There are tonnes of local grants available to companies in the UK. From Agri-tech Cornwall to Digital Drive County Durham, there are opportunities open to different types of businesses in many regions. To check out the full list of available local grants, check out the government’s site.

Business Loans

Once you’ve exhausted all of the potential grant options open to you, it’s time to look at specialised business loans. Many of these are open to businesses that have been rejected for mainstream business loans, so they can be a great avenue for small business funding.

Liberis: Business Cash Advance

Designed for businesses that have been running for at least four months and receive more than £2,500 per month in card payments, Liberis business cash advances are a type of loan for between £2,500 and £300,000. The great part about this program is that all repayments are flexible and can fit around your cash flow. Find out more here.

Enterprise Answers

If you have been rejected for a mainstream business loan, then a loan from Enterprise Answers may be the solution. This opportunity is only available to firms that have less than 249 employees and you could receive a loan of between £10,000 and £200,000. Visit the Enterprise Answers site for more information.

Fair Business Loans

Another scheme designed for businesses that have already been rejected for a loan, Fair Business Loans can offer you between £10,000 and £30,000 if your business has been running for at least 24 months. For full details, go to the Fair Business Loans site.

Funding Circle – UK

Companies that have been in operation for at least two years can apply for a loan from Funding Circle – UK. Unsecured loans of up to £350,000 and secured loans of up to £1 million are available. Repayment terms range from six months to five years and the application takes just 8 minutes! To apply, visit the Funding Circle site.

Local Loans 

As with business grants, there are plenty of loans open to businesses in particular regions across the UK. Some of these are only available in certain industries, but there should be at least one option open to your business. Check out the government’s site for the full list.

Crowdfunding

An increasingly popular funding option for small businesses and start-ups, crowdfunding involves asking for small sums of money from a large body of people. This often takes place online, with many crowdfunding networks popping up over the last few years. Many companies also publicise their crowdfunding programs through social media.

Whilst most examples of crowdfunding simply ask for donations to the company, there are a few other types. Some firms will offer a reward in exchange for money – this could be a gift, a ticket to an event, or any small token that will encourage people to invest in your business.

Other businesses source cash through debt- or equity-based crowdfunding. Debt crowdfunding is also known as peer-to-peer lending: individuals lend money to businesses with no need for banks to get involved. 

Equity crowdfunding is similar to angel investment. The main difference is that, rather than a single investor taking a large amount of equity, lots of people invest small amounts of cash in exchange for small portions of equity in a business.

Self-Funding

This might seem like an unusual point to include in a guide on how to raise finance, but it’s an option that many new businesses choose. Self-funding usually involves running a pretty tight ship as a business, a process known as bootstrapping. There are a number of ways that you could generate the capital that your business requires.

Personal Savings

Whilst this option isn’t open to every small business owner, some will have personal savings stashed away that they can call upon to build their company. If you have wealthy friends and family, you could also ask them to lend you some money.

Home Equity Loan

If you’re lucky enough to own a reasonable amount of equity in your home, then you could borrow money against the value of your property in the form of a secured home equity loan. These typically come with much lower rates of interest than other types of loan.

Even business owners that are unable to get another form of loan due to poor credit may be able to get a home equity loan. Lenders see these as less risky than conventional loans because your home is offered up as collateral. Clearly, you should only choose this option if you’re fairly certain that you’ll be able to pay it back!

Credit Cards

Possibly the most expensive form of self-funding, some business owners choose to fund their growth through credit cards. This will only be an option if you have a really good credit rating. It’s worthwhile shopping around to find a card with a good interest rate and coming up with a payment plan to make sure you don’t get into an unstable financial situation.

Securing Investors

Looking for investment in your business can be the best funding option for a number of reasons:

• Finance can be raised this way with less risk than many self-funding routes, making them a great small business funding option.
• Businesses that can’t get a mainstream loan can seek help from investors.
• You may be able to get a lot more capital than would be possible with grants (although it’s worth checking out grants on top of the other forms of investment you’ve secured). 

There are two main types of investor: venture capitalists and angel investors. We’ll cover venture capitalists in detail in this guide, but there is a separate BizSpace guide devoted to angel investors and how to find them.

Venture Capitalists

Venture capital companies manage investment fund pools and invest in businesses in exchange for equity.  Given that venture capitalists are looking for opportunities that will provide their investors with a decent return, they are only likely to invest in your firm if it shows strong growth potential.

Investments from venture capitalists are usually long term (often between five and eight years). It’s highly likely that this type of investor will be looking for a large stake in your business and voting rights, so this might not be the option for you if you want to maintain absolute control.

Besides funding your business, venture capitalists can help you out with support services. They may have in-house marketing or legal teams that can help your business to grow. Some venture capitalists will be able to introduce you to useful contacts, whilst others will share industry-specific knowledge with you.

Angel Investors

Angel investors differ from venture capitalists in that they invest their own money rather than managing funds for a pool of investors. In the past, you could only really meet this type of investor by networking. Now, however, there are loads of online networks where start-up owners and entrepreneurs can connect with angel investors.

You’ll need to make a pitch to get an angel investor to back your company. As with venture capitalists, they’ll take an equity stake in your business and may be able to provide you with additional support to help your business grow. For more information, check out the full guide on angel investors.

Choosing the Option That’s Right for You

We’ve covered loads of different financing opportunities in quite a short space of time. Overall, though, it’s about choosing the option that’s right for you. It’s definitely worthwhile checking out the grants that are available for your business – pooling together several grants can provide you with enough capital to grow your firm without paying anything back! Beyond this, the choice between loans, investors, or self-funding will really depend on your own financial circumstances and credit history.