Business finance: 6 sources of finance for a business

Looking for business funding options but not sure where to start? Startups has compiled a launch pad guide signposting the available funding for small businesses

After coming up with your killer business idea and putting the groundwork in place to start it, the next stage you need to consider is how you will fund it.

Some businesses, such as eBay or online ventures, will require very little money to start; others, such as retail, will need a substantial injection of capital.

Your options for raising finance are no longer limited to re-mortgaging your house or approaching your bank manager, cap in hand – click the links below to find out more about potential business finance solutions.

1. Business loan

Despite a fall in lending, the traditional business loan route is still a popular option for start-ups, and you have the advantage of retaining equity in your business. Start off by reading Startups’ step-by-step guide to obtaining a bank loan for a clear guide to maximising your chances of approval.

The government is pushing hard to increase the availability of these loans for small business, through initiatives such as Funding for Lending, Start-Up Loans and the Business Bank. Make sure you know the ins and outs of these as they could represent a vital lifeline for your start-up.

2. Small business grants

Not surprisingly, start-up business grants are highly sought-after, and hence difficult to come by. If you can obtain one, however, the benefits are obvious and numerous – start by reading our guide to the different types of grants available, and learn about the different institutions that provide them.

There are always new business grants emerging so keep your eye on the relevant places. Stay ahead of the competition by keeping our 10 top tips for securing a grant in mind.

3. Invoice finance or factoring

Invoice finance, or factoring, is a popular option for businesses with unpaid invoices to access working capital quickly. If you’re unfamiliar with this funding method, learn what it is and how much you can raise.

As the majority of providers will make you commit to a deal for 12 months or more, make sure you know how to choose the right one.

4. Crowdfunding

Crowdfunding sites allow members of the public to pool their resources, investing as little as £10 each in start-ups. If you’re unfamiliar with this increasingly popular method, read more about what it is and get the lowdown on the different crowdfunding platforms available.

Startups has various guides on how to crowdfund, including Modwenna Rees-Mogg’s guide on how to make a crowdfunding campaign attractive to the public.

5. Angel investors

Angel investors can provide huge injections of capital early in a business’ life to propel it to stratospheric heights, as well as using their experience and connections within a sector to great effect.

Learn about how the government’s Seed Enterprise Investment scheme can maximise the effect of such investments, and read Guy Rigby’s 10-step guide to wooing angel investors.

6. Bootstrapping

If you’re still finding funding difficult to come by, don’t despair. It is possible to bootstrap your business and there are a number of low-cost start-up opportunities.

Many businesses can now get off the ground for under £10,000 – and some sectors allow you to start for as little as half that. Any entrepreneur should know the essential principles for keeping a start-up as lean as possible; read Philip Letts’ guide to spotting a lean start-up to see how you can do this yourself.


(will not be published)

Showing 2 comments

    Edit profile

    Thank you for your comprehensive comment. We have tried to include most of the below but as it’s a signposting article it was created as a launchpad to direct people to different funding areas of the site where they can find out more about all the different options available to them. I’m sure readers will also find your list very helpful though.

  2. I am not too sure who this article is aimed at, but in any case it is not very comprehensive or that useful.

    Here is my list, which is a more comprehensive list for entrepreneurs/small business teams considering the range of funding options available to them.

    1. Self – consider putting in your own funds first. Most investors and banks would expect a contribution from the business owners up front. If you really believe in your business and you have plenty of equity in a UK property, taking out a secured loan/mortgage may be a very realistic option of obtaining needed cash for your venture.

    2. Friends and family – when your own funds are limited and the business is new/early stage, one should also consider friends and family as an additional source of additional funding. It can be quick and much simpler than most of the other forms of capital.

    3. Bank – yes, debt funding is the next obvious source, whether a bank over draft or a longer term fixed loan. This may not be easy for those business in the very early stages without providing a bank with some sort of guarantees.

    4. Professional introductions – these can come in many forms but the most obvious one is using the contact of your accountant. Many accountants have clients who are seeking investment opportunities and your business could be a useful fit for one of your accountants clients.

    5. Bartering – essentially this if offering something that you or your business can provide another party. In return they provide you with something of equal value. Typical example is providing XX months accountancy services to an advertising agency. In return they provide xx months free marketing/advertising services. Typically your bartering partners are business partners and associates who offer quid pro quo deals and arrangements to help you secure services or even fixed assets needed for your business.

    6. Business angels and other professional investors, or even angel groups/teams. Plenty on this web site about this kind of capital raising.

    7. Venture capital – depending on your venture, its stage of growth, this may also be an option. Venture funds have changed considerably over the years and there are many more these days. They also vary a great deal in the amount they will consider investing. They are a lot more approach able these days than in the past.

    8. Crowd funding – not only for raising funds for equity, but now there are crowd funding sources willing to lend funds too – check out Nicola Horlick’s new crowd sourcing (debt) venture.

    9. Invoice funding/factoring – as detailed in the main article. Available from your principle bank but there are also plenty of specialist.3rd party companies offering this kind of working capital funding.

    10. Sale and lease back financing – very useful if you have an asset containing a lot of equity. Again your bank, accountant or other specialist 3rd parties can provide a lot of useful information about this kind of medium/long term funding option.

    11. Leasing of capital equipment – not only vehicles can be obtained for the business using leasing. Machinery, computer equipment and other capital assets can be obtained through a capital lease with only a small deposit. Helps to free up your capital to use as working capital in your business.

    12. Grants and other government incentives – as above.

    Hope this helps.