Funding your small business

Funding your small business

Do you need cash to get your business off the ground?  Or are you seeking funds to support a growing business?  This article looks at where small business owners find the funds to get going, or to expand their existing business.


In the UK there are many grants available to small start-up businesses.  It’s worth doing your research to find out what is available to you.  In addition to grants there are government-backed, personal start-up loans where the recipient will receive mentoring from a professional.


The term ‘bootstrapping’ is used when starting a business without external financial support.  The small business owner uses their own cash or other existing personal resources to get started.  For example: a carpenter uses their personal woodwork tools to start their business.  The advantages of bootstrapping are that you own your business outright and you don’t waste time seeking investors.

Getting help from friends and family

Asking friends and family for a loan can be a great way to finance your new business venture.  This method of borrowing definitely has its advantages, such as no/low interest, and repayments within a mutually agreed time frame.  However, it’s wise to treat this as a business agreement and record all payment transactions, this will avoid any complications further down the line.  If you are offering part of your business in return for the loan, make sure to seek legal advice first.

Personal loans and credit cards

Personal loans and credit cards are frequently used as a source of funding for a new business.  Credit cards are the most popular forms of borrowing for SME owners.  The one thing to remember is that your personal liability is not limited and you are personally responsible for the repayments.

Business Bank Loans

Don’t be put off by the criteria required for a business bank loan.  If you need a source of funding for your new business and don’t have the money available to you, you should look into a business bank loan.  You will need a solid business plan, with projections and a good credit rating to be considered, but there are many lenders out there with variable interest rates.


Factoring (invoice financing), is not a source of funding but it can prove very useful.  A factoring company will free up your company’s cashflow, in exchange for a flat percentage of your invoice value. One of the biggest sources of stress for small companies is delayed or late payment of invoices. The factoring company will often take care of these issues on your behalf.

Angel Investors

If the time has come to expand your business, or you are trying to get a small business off the ground and need an injection of cash then an angel investor could be exactly what you need.  The term refers to a wealthy individual who seeks to support you financially and mentor you through the growth process, in exchange for a percentage of your business.  Their expertise will most definitely enhance your business growth but again, make sure you seek legal advice before entering into an agreement with a third party.  As a small business owner you need to protect your own interests.


Crowdfunding has become a popular way to fund start-ups.  There are now various platforms where entrepreneurs can showcase their business idea and attract people to invest in their idea.