A guide to the sources of finance you can use to start a business 

23/04/2018 11:35



For most new businesses that fail, the reasoning behind their collapse has something to do with cash flow problems.

Those first few months when your business is just finding its feet are vital and before business owners begin trading, they need to make sure they have enough money to set up the business and cover initial running costs.

So, what are the most common sources of finance when you are starting your business and which are the most reliable?



Personal savings and informal loans

This is the most common sort of finance for those that are starting their own business. Informal loans are those that are provided by friends and family that may be on preferential or 'soft' terms, including the possibility of an interest-free loan.

Relatives or friends may also consider investing money in a business in return for a share of its ownership, even if they act as a 'sleeping partner'.



Venture capital

Venture capital is a method of financing a business where a proportion of the firm's share capital - or equity - is sold in return for a cash investment in the enterprise.

The only downside of this financing option is that it means some measure of control or ownership over the business must be passed over to the new shareholder.



Business angels

Business angels are private investors who look for opportunities to invest money into new or growing small firms. Most regions of the UK provide services that match business angels with suitable start-ups, which encourages local investment and mentoring on a small scale.



Equity-based crowdfunding

Crowdfunding is when multiple people invest a very small amount of money in a business. Crowdfunding platforms are available that can match businesses with relevant investors.



Government grants

Grants provide finance to allow a business to undertake a specific project that, without financial assistance, would not be able to proceed. Such projects might involve the initial start-up of the business, developing a new product or buying equipment.

Unlike a traditional loan, grants generally don’t have to be paid back unless the business fails to comply with the specific eligibility requirements and conditions of the scheme.


Are you seeking finance for your start-up business? We have a number of funding options available on our site and are able to match businesses with high-quality investors. Find out more here

We aim to deliver much needed capital to start-ups and SMEs

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