10 easy ways to get finance for your business

So, you’ve got a great business idea and you’re raring to go – but there’s just one problem: you don’t have the cash to get started. Don’t worry, you’re not alone.

Thousands of UK entrepreneurs find themselves in the same position every year. But the good news is that there are ways to get finance for your business, even if you don’t yet have much trading history.

Of course, not all of these will suit, or be available to every type of small business.

Ways to fund your business without a bank loan

There are a number of ways to fund a business without taking out a bank loan. One option is to use personal savings. This can be a good option if you have enough money saved up to cover the start-up costs of your business. Another option is to seek investors. This can be done by reaching out to family and friends or by pitching your business idea to potential investors.

You could also look into crowdfunding, which allows you to raise money from a large number of people in small increments. Finally, you could look into government grants or other forms of financial assistance. While these options may require more work than taking out a bank loan, they can be viable options for funding your business.

Here are a few options to consider

1. Savings/family loans

The most obvious source of funding for a small business is personal savings. If you have money put away in a bank account, this is the first place you should look to when starting up your business. You may also be able to get help from family and friends in the form of loans or gifts. However, be sure to draw up a contract if you do receive a loan, as this will help to protect both parties in case things go wrong.

Savings are a key part of most family’s financial stability, but they can also be a source of contention. When it comes to loaning money to family members, it’s important to have a clear understanding of the terms of the loan before any money changes hands. This way, there’s no confusion about repayment schedules or interest rates down the line. Having a written agreement is also helpful so that everyone is on the same page and there’s a record of the loan. Family loans can be a great way to help out a loved one in need, but it’s important to make sure that everyone is on the same page to avoid any tension or conflict down the line.

Another option is to sell a property, such as your home, to raise funds for your business. This can be a risky move, but it could give you the money you need to get started. Whatever route you choose, be sure to carefully consider all your options before making a final decision.

2. Bank overdrafts

Bank overdrafts can be a helpful way to manage your finances, but it’s important to understand how they work before you sign up for one. An overdraft is a line of credit that is linked to your bank account. This means that if you have a negative balance in your account, you can still spend up to the limit of your overdraft. However, you will be charged interest on the amount that you are overdrawn.

Overdrafts are a type of short-term loan provided by banks. They can be either arranged or unarranged. An arranged overdraft is one that you have agreed with your bank in advance, and there will be a set limit on how much you can go overdrawn. An unarranged overdraft occurs when you go over your agreed limit without letting your bank know in advance, and this will usually incur much higher charges.

Bank overdrafts can also be either secured or unsecured. A secured overdraft is one where the borrowing is backed by an asset such as your property, while an unsecured overdraft is not backed by any asset. Bank overdrafts can be a useful way to manage your finances, but it is important to be aware of the potential risks and costs involved.

• An overdraft amount is available between £500 and £25,000
• A variable annual interest rate of 10%
• An annual fee that is 1% of the agreed overdraft (with a £50 minimum)

Should  you use £10,000 of a £15,000 overdraft, you’d pay approximately £1,150 a year on top of the amount borrowed.

The interest rate on a business overdraft will depend on the financial health of your business. If your business is doing well, you will likely get a lower interest rate. However, if your business is struggling, you will probably be charged a higher interest rate. Overdrafts can be a helpful tool for managing your finances, but it’s important to understand how they work before you sign up for one.

3. Business grants

Business grants are basically free money – what’s not to love? As you’d imagine, there is a pretty big catch. There are hundreds of grants out there, but they all have different conditions that need to be met. Some are only offered to businesses in a particular area, some can only be accessed by businesses in particular sectors, and some require your business to be doing truly groundbreaking stuff in terms of research and development.

While business grants can be a great way to get funding for your business, but it’s important to understand how they work before you apply. Grants come in all shapes and sizes, and can be used for a variety of purposes. Some grants give you a lump sum when you’re accepted, while others pay in instalments or require you to pay and then claim money back.

Others still may require matched funding, which means that if you’re applying for a grant of, say, £10,000, you’ll need to match that with £10,000 of funding from other sources. Business grants can be a great way to get the funding you need to start or grow your business, but it’s important to understand the requirements before you apply. Otherwise, you may not be eligible for the grant or may not be able to use the funds as you intended. Do your research and make sure you understand the ins and outs of business grants before youapply.

In other words, it can be extremely tough to actually get your hands on one of these things. Even if you do manage to find a grant that you’re eligible for, the application process is often long and complicated. So while business grants may sound like a great idea in theory, the reality is that they can be quite difficult to obtain.

4. Invoice finance

Invoice finance is a service that allows businesses to unlock the value of their unpaid invoices, boosting their cash flow and stopping unreliable clients from getting in the way of their expansion plans. Invoice finance companies will typically charge a fee for this service, which is based on the value of the invoices being submitted.

Essentially, you sell your invoices to a third party at a discount and they advance you the funds, minus their fee. This means you don’t have to wait 30, 60, 90 days or even longer to get paid- you can get the money as soon as the invoice is raised. This can be a huge help for businesses who are struggling to make ends meet or who have big orders that they need to finance in order to take advantage of.

There are a few different types of Invoice finance but the two most popular are:

• Invoice Factoring – is where you sell the whole invoice to the provider and they chase down the payment for you- so it’s hands-off for you.
• Invoice Discounting – is where you still chase down the payment yourself but you get an advance on the money which can be helpful if you have strong relationships with your customers and want to keep that control.

If you’re not sure which is right for you, just fill in this quick and easy form to get bespoke quotes from the UK’s leading invoice finance companies.

For businesses with high-value invoices, the fees are generally lower. Invoice finance can be a helpful tool for businesses that are struggling to manage their cash flow or that have unreliable clients.

5. Community schemes (CDFIs)

Community development finance institutions (CDFIs) are a hidden part of the UK’s financial landscape. They are responsible lenders that provide both finance and support to the businesses they lend to. CDFIs are usually set up as community schemes, meaning that they are owned by the local community. This makes them more accountable to their borrowers and gives them a greater understanding of the local area. CDFIs offer a range of financial products, including loans, overdrafts and leases.

Number of community schemes such as Community Development Finance Institutions (CDFIs) offer an important alternative to mainstream banking, providing financial services to those who might not otherwise have access. CDFIs are typically focused on lending to small businesses and entrepreneurs in disadvantaged communities, and as such play an important role in promoting economic inclusion. However, the recent years of austerity have hit CDFIs hard, with many having to scale back their operations or even close their doors entirely. This is a huge loss for the communities they serve, and highlights the need for greater investment in this vital sector.

They also provide support in the form of advice and mentoring. This can be invaluable for small businesses, which often struggle to access mainstream financial services. In recent years, the government has given considerable support to CDFIs, recognising their important role in boosting entrepreneurship and economic growth. Thanks to this support, CDFIs are now operating in every region of the UK. If you’re looking for an alternative to mainstream lenders, a CDFI could be the perfect solution.

6. Crowdfunding

Crowdfunding has been around for centuries, but it’s only in the past few decades that it has become a popular way to finance small businesses. The essential idea of crowdfunding is to solicit small contributions from a large number of people, which can then add up to a significant amount of funding. Crowdfunding platforms like Kickstarter and Indiegogo have made it easier than ever for entrepreneurs to connect with potential investors, and the success of many businesses has hinge on their ability to secure funding through these platforms.

There are four different types of crowdfunding – with the main difference being what you give your investors in return for their cash:

Equity crowdfunding – is an increasingly popular way to raise capital for businesses. In essence, it involves giving away a stake in your company in exchange for funding. This can be a great way to raise large amounts of money, but it also comes with some challenges. For one, you’ll need to disclose a lot of information about your business to potential investors. Additionally, you’ll need to be careful about how much of your company you give away. Equity crowdfunding can be a great tool for businesses that are well-prepared and able to navigate the challenges that come with it.

Rewards-based crowdfunding – is a popular way to raise money for a variety of projects, from product development to start-up costs. As the name suggests, backers are rewarded for their investment, often with a discount on the final product. This can be a great way to generate interest and excitement in a project, but it’s important to remember that many crowdfunding sites have an ‘all or nothing’ policy. This means that if you don’t reach your target investment amount, you won’t receive any funding at all. For this reason, it’s important to set a modest and achievable goal. You can always raise more than you initially ask for, but it’s much harder to make up for a shortfall. Keep this in mind when planning your rewards-based crowdfunding campaign.

Peer-to-peer crowdfunding – also known as P2P or social lending, is a method of raising capital that involves borrowing from a group of individuals instead of a financial institution. Peer-to-peer crowdfunding platforms facilitate the process by connecting borrowers with lenders and allowing them to negotiate terms and conditions. The advantages of peer-to-peer funding include lower interest rates, more flexible repayment terms, and the potential to build relationships with lenders. However, it is important to remember that peer-to-peer funding is still a loan, so borrowers are expected to repay the funds with interest. For more information on peer-to-peer funding, please see the dedicated section on peer-to-peer lending.

Donation crowdfunding – is a type of crowdfunding where businesses or individuals solicit donations from the public in order to fund a project or venture. Donation crowdfunding is often used to fund charitable projects or causes, but it can also be used to fund businesses or individual ventures. Donation crowdfunding can be an effective way to raise funds, but it can also be very difficult to obtain funding from Donation crowdfunding platforms. In order to be successful in donation crowdfunding, businesses or individuals must have a strong track record of supporting their local community. They must also have a clear and concise plan for how the funds will be used. Donation crowdfunding can be a great way to raise funds for businesses or causes that are supporting their local community.

For anyone unfamiliar with the concept, crowdfunding is the practice of raising money from a large number of people, typically via the internet. In return for their investment, backers typically receive rewards or equity in the business. While it can be a great way to get your business off the ground, it’s important to go into a crowdfunding campaign with your eyes open.

The British Business Bank’s crowdfunding guide is a great resource for understanding the ins and outs of this type of funding. In addition to providing an overview of the different types of crowdfunding platforms, the guide also offers advice on how to create a successful campaign. If you’re thinking of using crowdfunding to finance your business, then this is essential reading.

While there are some risks associated with Crowdfunding, such as the possibility of not reaching one’s financial goals, the potential rewards can be well worth the effort. In an increasingly competitive marketplace, Crowdfunding provides small businesses with a much-needed resource that can help them get their start.

7. Business cash advance

Business cash advance is a type of business loan in which you pay back the loan through a percentage of your card sales. This type of funding is becoming increasingly popular for small and medium-sized businesses in the United Kingdom. The application process for business cash advance involves agreeing on the amount you want to borrow with the lender, as well as the fixed fee that will be charged. Once these terms are agreed upon, you can access the funds relatively quickly and begin using them for your business purposes.

This type of funding that allows business owners to borrow money against their future sales. This can be a helpful option for businesses that need funding but don’t have the collateral to secure a traditional loan. Business cash advance lenders typically have different requirements than banks, so it’s important to research your options before applying. Most business cash advance lenders will require you to have a minimum trading history and monthly turnover. But if you’re eligible, business cash advance could be a clear, flexible way to fund the expansion of your business. When used wisely, business cash advance can be a helpful tool for business owners who need access to quick capital.

Cash advance’s can be used for a variety of purposes, such as covering expenses, investing in new inventory, or hiring additional staff. Repaying the loan is typically done through an automated deduction from your card sales, which makes repayment easy and convenient. Overall, business cash advance is a helpful option for businesses that need access to extra funding.

8. Asset finance

Asset finance is a broad category that covers many different types of lending. Asset finance can be broken down into two categories: secured and unsecured. With secured asset finance, the lender will place a charge on the asset being financed. This means that if the borrower defaults on the loan, the lender can repossess the asset to recoup their losses.

• Finance that helps you buy or lease assets like vehicles and industrial equipment
• Finance that unlocks the value of things owned by your business

Unsecured asset finance does not involve the placement of a charge on the asset being financed. This means that if the borrower defaults on the loan, the lender cannot repossess the asset. Asset finance is a popular form of lending because it allows borrowers to acquire assets without having to pay for them upfront. Asset finance can be used to finance a wide variety of assets, including vehicles, machinery, and equipment.

9. Peer-to-peer (P2P) lending

Peer-to-peer (P2P) lending is a type of crowdfunding that allows businesses and individuals to borrow and lend money without going through a traditional financial institution such as a bank. P2P lending platforms like Funding Circle connect borrowers with investors who are willing to fund their loan. Loans are typically funded by multiple investors, which helps to spread the risk.

With this type of loan a businesses borrow money from individual investors rather than banks or other financial institutions. The interest rates on P2P loans can be higher than conventional business loans, but the terms are often more flexible. P2P lending platforms like Funding Circle allow businesses to borrow between £10,000 and £500,000 at annual rates of 2.9%-12.1%.

The interest you pay then gets pooled and eventually returned to the individual investors that funded the loan in the first place. Depending on your trading history, some P2P lending sites may also require you to put up security on your loan – in other words assets like equipment or property that can be repossessed if you fail to keep up repayments. However, P2P loans can be a good option for businesses that are struggling to get finance from traditional sources.

Because P2P lending platforms manage the entire process, from assessment to funding, it can be a quicker and easier way to get a loan than going through a bank. In addition, P2P lending offers competitive interest rates for both borrowers and investors. As a result, P2P lending is an increasingly popular option for businesses and individuals looking for alternative financing.

10. Bootstrapping

Bootstrapping is a process whereby an individual or organization funds its own business without any outside investment or aid. Bootstrapping generally requires the use of personal savings, loans, and profits from the business itself in order to finance growth. While bootstrapping is often associated with small businesses and startups, many large businesses were also started through this method. Some of the most famous bootstrapped businesses include Apple, GoPro, and Spanx.

there are a number of advantages with bootstrapping among them is having complete control over the company to be retained by the founder or founders. Additionally, it can be seen as a more principled way of doing business, as it does not require compromise in terms of ideology or vision. However, the major downside to bootstrapping is that it is incredibly difficult.

According to most estimates, the failure rate for startups is somewhere between 50 and 90 percent. There are a lot of factors that can contribute to this, but one of the most important is a lack of funding. Without outside investment, it can be very difficult to keep a startup afloat, especially in the early stages when cashflow is often tight.

This is why so many entrepreneurs choose to seek out venture capitalists or other investors. However, it is possible to bootstrap a business, especially if you are willing to be creative and resourceful. One way to do this is by using low-cost or even free resources, such as open source software. Another is to get creative with your business model, finding ways to generate revenue that don’t require a lot of upfront investment.

If you can make it work, then the rewards can be huge. Not only will you have the satisfaction of knowing that you did it all yourself, but you’ll also have a much higher chance of achieving a profitable exit.

Without outside investment, businesses have to rely solely on their own resources, which can often be scarce. This can lead to long hours and immense stress for those involved in the business. In short, bootstrapping is a risky but potentially rewarding way to start a business.

Key takeaways

As any small business owner knows, financing is one of the most important aspects of starting and running a successful company. There are a number of different ways to finance a business, from bank loans and venture capital to government grants and crowdfunding. Each method has its own advantages and disadvantages, and it’s important to choose the right one for your specific business.

For example, established businesses may have an easier time securing a bank loan than startups, while companies that are focused on innovation may be better suited for venture capital. Ultimately, there is no one-size-fits-all solution when it comes to business financing, but by carefully considering all of your options, you can find the best way to fund your company.