What Business Funding is Available in the UK?

Getting business funding could be the key to unlocking the next stage of your business plan. It could also help when you need an injection of cash to cover costs. Read on to find out what options are available to you, and how to get funding as a new business.

Connor Campbell Published on 21 June 2022.
What Business Funding is Available in the UK?

Business funding is any form of financial assistance that can help you reach a goal, or cover a need, related to your business.

This means business funding includes everything from business loans you pay back, to grants you do not, to the help you get from friends and family.

Below, we go into detail about the various business funding options currently available in the UK.

Business funding options in the UK

Not every form of business funding will be suitable for every situation. That is why it is important to familiarise yourself with the various types available, so you can make an informed decision when you need to seek business funding.

Business loans

Securing business funding using a business loan involves borrowing a sum of money from a lender, and then paying it back, with interest.

There are two main types of business loans to consider. Secured business loans require you to put up an asset, such as a property or piece of equipment, as security in order to access funds. It's important to note that these assets could potentially be repossessed if you failed to repay the loan.

Unsecured business loans, on the other hand, don’t require you to put up an asset. Instead, eligibility might be based on your business’s trading history, profit or turnover. Lenders sometimes also ask for a personal guarantee.

Business loans can be used for different purposes and by different organisations. For example, a cash flow loan is designed to provide a short-term injection of funds, while a limited company business loan is only suitable for private limited companies. If you want a self-employed business loan, you may need to supply extra documentation to prove your income.

When looking for a business loan as a source of business funding, there are a number of traditional high street lenders to choose from, as well as a variety of online business loan providers. There are also government business loans that you can apply for, if you meet the eligibility criteria.

» COMPARE: Business loans

Business grants

If you successfully apply for a small business grant, you could receive funds to help your business that will not need to be paid back. That is the most important difference between a business grant and a business loan.

Business grants come in all shapes and sizes, and are offered on a national, regional and local basis. Some business grants are specific to Scotland, Wales and women, so it is worth doing your research to see what you might be eligible for.

Commercial mortgages

Another way you may be able to expand or upgrade your business is through buying new premises. However, unless you have the cash to pay for a property outright, you may need to get a commercial mortgage.

There are four main types of commercial mortgage:

» COMPARE: Commercial mortgages

Alternative business funding

There are other forms of business funding that you can apply for to meet your goals, including:

  • Asset finance: This is where you borrow money against your balance sheet assets. You could also use asset finance to fund the procurement of business equipment.
  • Invoice finance: This involves borrowing money against pending customer invoices. You could then either give the responsibility of chasing customer payments to the lender (invoice factoring), or retain that responsibility yourself (invoice discounting).
  • Merchant cash advance: Here, you borrow a lump sum, and then pay it back through a pre-agreed percentage of your future customer card payments. This means it is generally only suitable for businesses that process a high volume of customer debit and credit card payments.
  • Crowdfunding for businesses: This involves raising money via multiple lenders or investors, rather than one single source. This could be through debt-based crowdfunding, equity-based crowdfunding, or rewards-based crowdfunding.

» MORE: 17 different sources of business finance

How to get funding for a new business

If you are a new business looking to get start up funding, there are a number of sources you can investigate.

There are dedicated start up loans available that can help you get your business off the ground, or allow you to accelerate and expand in your first few months.

Similarly, there are specific start up grants only available to new businesses, on a national, regional and local level.

You may also consider looking into approaching an angel investor. These are people who can offer financial support and professional guidance, often in exchange for a stake in your business.

» COMPARE: Start up loans

Image source: Getty Images

About the author:

Connor is a writer and spokesperson for NerdWallet. Previously at Spreadex, his market commentary has been quoted in the likes of the BBC, The Guardian, Evening Standard, Reuters and The Independent. Read more

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