16 Ways To Get Start Up Funding in the UK

Start up funding can be crucial in getting small businesses up and running. From start up business loans to lines of credit, grants, crowdfunding and angel investors, here are the various options for securing the start up business funding you need.

Tim Leonard, Connor Campbell Last updated on 19 July 2022.
16 Ways To Get Start Up Funding in the UK

Start up funding is all about capital and getting the money that you need to get your business off the ground. And working out how best to secure the funding for a start up is a task most budding entrepreneurs will face. The biggest questions surround what funding is available for start ups and then finding out how each type of funding works.

There are many different types of start up funding available in the UK, which can be both a blessing and a curse if you’re not sure where to begin. So to help you understand what could be available, here are 16 ways to get start up funding in the UK.

Start up business finance

Start up business finance covers a range of loan and financing options from banks, building societies and alternative finance providers designed to support businesses in their early stages. These include:

Start up business loans

These loans are aimed specifically at new businesses with little in the way of credit history, assets or trading history. Instead, to get a start up business loan, lenders will usually want to see a business plan and projections of how you think your business will perform before making a lending decision. Some lenders offer these loans from their own balance sheet, but many also lend using the Start Up Loan Scheme introduced by the government to try to ensure businesses have access to the funding they need.

» COMPARE: Business start up loans

Government funding for start ups

The Start Up Loan Scheme is the main source of government support for new businesses in the UK. Under the scheme, eligible entrepreneurs who have a business that has been trading for under three years, or plan to open one, can apply for between £500 and £25,000 of funding as support.

These loans, which are funded through the British Business Bank and its subsidiary Start-Up Loans Company, are to the individual, not the business. They are also unsecured, so no collateral is required. Repayment of the loans is required over no longer than five years, and the interest rate is fixed at 6% per year.

Traditional business loans

This type of business loan can be harder to secure as a new business. You may not have yet built up the good business credit rating that is typically required and will likely lack the hard proof – by way of profit, revenue and turnover – that your business is safe to lend to.

Getting a standard business loan might still be an option if you’re willing to offer a personal guarantee as a director of your company to cover any loan repayments your business might not be able to make from your own personal finances.

Alternatively, you may have some form of collateral you can put forward as security towards getting a secured business loan. This might include property or other assets owned by the business.

» COMPARE: Secured business loans

Personal loans

Another option could be to take out a personal loan in your own name rather than that of your business. The lending decision will be based on your personal credit score and financial situation, but it’s important to check with the lender whether they are happy for a personal loan to be used for business purposes.

» COMPARE: Personal loan deals

Business credit card

When managed properly, a business credit card can offer a flexible way of borrowing to fund the growth of your start up. They are very similar to personal credit cards and if your business doesn’t have much in the way of a credit history, some lenders will base their decision on your personal credit score or ask for a personal guarantee that will oblige you to make repayments from your own finances if the company doesn’t.

» MORE: Business credit cards explained

Business line of credit

Establish a business credit line, and a business will have funds available that it can draw on as and when required up to a pre-agreed limit. This form of short-term borrowing offers flexibility, but there will be a set date when the line is closed and everything will need to have been paid back.

» COMPARE: Business credit lines

Further options for companies that are already trading

If your business is up and running and you’re looking for start up funding to support the early success you’ve had, there are a number of other options you might be able to explore:

  • Invoice finance, where companies borrow against customer invoices that are still to be paid.
  • Asset financing, which sees a lender fund the purchase of assets for your business and your company pays to lease the asset or buy it outright over a period of time.
  • Asset refinancing, where finance can be raised by selling a company asset to a lender and leasing it back.
  • Merchant cash advances, which involves raising funds based on a business’s projected card sales.
  • Business bridging loans, where a company can secure short-term funding, usually secured against property it owns.

Grants for start ups

As a source of funding that doesn’t need to be repaid, start up business grants should always be explored. Numerous grants from various organisations and the government are available in the UK to support businesses.

However, with competition for this free support understandably high, it’s important to check carefully whether you’re eligible for a particular grant before you apply and be patient as you await response.

» MORE: Small business grants

Crowdfunding for start ups

The rise in popularity of crowdfunding in recent years means it is now a fully fledged option for securing start up funding in its own right, rather than just an alternative to explore when the more traditional sources of lending are closed.

Crowdfunding can take various forms, but the main premise is to persuade a number of smaller investors to each put forward an investment that collectively will raise the funds your business needs. Each investor will generally take a small stake in your business in return.

» MORE: Crowdfunding for businesses

Friends and family

Sometimes the start up funding help you need might be closer to home than you think. For example, sharing your business idea with family and friends could be a good way to gauge whether you’re on to something with potential. But equally, it may pique their interest enough that they’re willing to offer support financially to help get it off the ground.

» MORE: How to safely borrow from family and friends

Angel investors

Angel investors are typically high-net-worth individuals who want to invest in smaller or start up businesses in the hope of securing a return. Angels will normally take a minority stake in the business in return for their ‘seed funding’. But often just as importantly, they can provide a useful source of support to business owners, sharing their knowledge, experience and perhaps even business contacts to help drive the business forward.

» MORE: How angel investors support businesses

Venture capital

Venture capital shares some similarities with angel investing but is generally on a much bigger scale. Instead of an individual investor, venture capital generally involves an entire firm, run by professional investors, taking a stake in your business. As a result, investment amounts are typically much larger and a venture capital firm will usually want a say in how your business is run, often by insisting some of its own people are brought in.

What to do once you have your start up funding

Securing the start up funding that you need is likely to come as a huge relief and, when used the right way, can get your business off on the right foot, or push it forward if it’s already going. The key is spending the finance you’ve raised sensibly and in a manner that will hopefully benefit your business.

Most likely, you’ll have made plans for how you’ll spend your start up funding already. Buying essential equipment, finding premises, recruiting some extra help, and advertising might all be on your list. Whatever your intentions, think carefully before you spend, and consider whether you need to hold some of the funds back in reserve.

And of course, in the world of business, it’s also never too early to start thinking about the options for raising your next round of funding.

» COMPARE: Business loans

Image source: Getty Images

About the authors:

Tim draws on 20 years’ experience at Moneyfacts, Virgin Money and Future to pen articles that always put consumers’ interests first. He has particular expertise in mortgages, pensions and savings. Read more

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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