Starting and growing a business requires capital. While bootstrapping with personal finances is possible for some startups, most businesses will need to secure outside funding at some point. Knowing what funding options are available and how to access them is crucial for any entrepreneur. This guide covers the key things you need to know about securing financing for your UK business.

Assessing Your Funding Needs

Before you start pursuing investors or loans, take time to thoroughly assess how much money you need, and what you will use it for. This involves creating financial projections and analysing your funding requirements for start-up costs, operations, equipment purchases, marketing, expansion plans, and other business expenses. Many lenders will want to see a business plan before they consider lending any money, so use business plan templates as a starting point.

Be realistic about the amount you need to request. Asking for too little could stunt your growth, while asking for excessive funding can turn off investors because they will see you as a high-risk. Seek expert advice from your accountant to determine your ideal fundraising amount and terms. It is important to be realistic about how much funding you need. Remember, many high street banks are risk averse in the wake of the 2009 financial crash.

Common Funding Sources for UK Businesses

Once you know how much capital you need for your business idea, explore these common funding sources for UK companies:

Personal Savings – Bootstrapping via personal savings is how many entrepreneurs initially fund their venture. While limited, it avoids debt or giving up too much equity in the company.
Friends and Family – Borrowing from people you know well is another bootstrap method. Be sure to formalise any loans with contracts and repayment schedules.
Bank Loans – Traditional bank loans remain a popular funding source. Banks offer various loan types like small business loans, equipment financing loans, and commercial mortgages.
Asset Finance – Also called equipment leasing or hire purchase, this allows you to acquire assets like machinery or vehicles to support growth and pay for them over time.
Credit Cards – Many entrepreneurs use personal or business credit cards to cover start-up costs. Use carefully and minimally to avoid high interest charges.
Government Grants and Loans – The UK government offers various grants, loans, and match funding schemes to support small businesses, which can provide capital without taking on debt.
Angel Investors – Wealthy individuals who invest their own money into startups in exchange for equity or convertible debt. Typical investment size is £10,000 to £150,000.
Venture Capital – Institutional investors who provide substantial sums of growth capital to businesses with major expansion potential. Investments range from £250,000 to £5+ million.
Crowdfunding – Raising many small investments from a large group of individuals, typically via an online platform. Allows you to tap into the “crowd” for funding.

Preparing Your Funding Application

To boost your chances of securing funding, investors and lenders will want to see a solid application that communicates your business viability. Key items to have ready include:

Executive Summary – Highlights your company, products/services, objectives, financial projections, and funding needs.
Business Plan – A comprehensive plan covering all aspects of your business operations, management, and growth strategies.
Financial Statements and Forecasts – Historical and projected financial statements that convey your financial position and performance.
Pitch Deck – A visual presentation that summarises your business plan and growth potential. Used when pitching to potential investors.

Also, have your supporting documents prepared, like tax returns, personal financial statements, and any prototypes or collateral.

Allow plenty of time to complete the funding application process thoroughly. You may need to refine your materials after receiving feedback.

Choosing the Right Funding Mix

Most businesses use a combination of funding sources at different stages. Aim to choose the optimal funding mix:

Minimise equity dilution where possible
Balance debt costs with ability to repay
Match funding terms with use of capital
Limit personal guarantees and collateral requirements
Blend amounts from different sources to meet needs

Seeking expert guidance from financial advisors and accountants can help identify the best funding composition for your situation.

With careful planning, preparation, and persistence, you can secure the necessary financing to turn your business vision into reality. Do your homework to find the right funding solutions, present a compelling case to investors, and manage the capital responsibly to profitably grow your company. Be prepared for a process that may take many months and multiple attempts before securing funding. Stay determined!