Funding for Small Business

Financing and cash flow is crucial to the success of any business, in particular those with little working capital available, or start-up businesses.  There are a number of ways to raise investment or funding, rather than using your life savings.  These range from an old-fashioned bank loan, tax incentive schemes and getting investment off a Dragon on Dragon’s Den – otherwise known as an Angel Investor!

Here we take a look at a number of options available for small businesses to help take their business to the next level, or for a start-up to get off the ground.

1. Apply for a Start-Up Loan for your business via GOV.UK

You can apply for a government-backed Start-Up Loan of between £500 to £25,000.  This is an unsecured personal loan available to UK residents who have been trading for less than 24 months, or are planning to start a business.


  • There is no application or early repayment fee, and they can be repaid over a period of 1 to 5 years.


  • The fixed interest rate of 6% is higher than some other methods of funding.

2. Tax Efficient and Tax Relief Schemes for Investors

There are tax-efficient schemes you may want to consider that encourage investment.  They include Government-backed schemes such as The Enterprise Investment Scheme (EIS) and the Seed Enterprise Scheme (SEIS).  They encourage investment by incentivising investors to purchase shares in your business by getting tax back.  If they make a loss on the investments, they will get further tax relief.  Other tax relief schemes include R&D Tax Credits, Annual Investment Allowances, Enhanced Capital Allowance and Employment Allowance Scheme.


  • An attractive option to incentivise investors to invest in your business.


  • Both the company and investor will need to meet a number of conditions and requirements.

3. Crowdfunding

An alternative solution away from the more traditional methods of funding.  It’s a highly organised online community and one that is becoming increasingly common and widely accepted.  It involves generating funding and investment via the internet from the general public and in social media circles.  Because it’s online, fundraisers get instant access to their new capital.


  • You can reach a large number of people fairly quickly, especially if you have a strong and innovative proposition.


  • It can take a long while to achieve your target and people may steal your ideas.

4. Bank Loans

The most traditional method of obtaining funding which may involve meeting your Bank Manager at your local High-Street Bank.


  • If you have a good credit score and a good relationship with your bank, you can get low-interest rates along with a structured form of lending.


  • The process of obtaining a bank loan can be quite lengthy and tedious.

5. Angel Investors

An Angel Investor is a high net worth individual who provides financial backing to entrepreneurs.  Some work in groups, some work alone.  They typically invest in exchange for a share in the business.  The TV programme Dragon’s Den is a perfect example of this!


  • Angel Investors can provide invaluable expert knowledge and advice, in addition to the cash!


  • You will need to be prepared to give up a stake in your business in exchange for the investment.

6. Venture Capitalists

A VC is a private equity investor who generally invests a lot more than an Angel Investor.  Similar to an Angel Investor, they will seek an equity stake.  They will be attracted to high growth potential businesses so they can achieve a good return on their investment in a short period of time.


  • Similar to Angel Investors, they can also provide expert knowledge to grow the business, and open the door to their large network.


  • Due to the large investment, a large proportion of the business will need to be offered in exchange.

7. Family & Friends

Sometimes the quickest and easiest method of investment is persuading those closest to you to invest in you!


  • A quick and flexible way to get funding, usually with no formal credit checks.


  • Mixing business with pleasure can sometimes damage relationships so that needs to be thought through beforehand.

8. Research and Development Grants

There are hundreds of R&D Grants available to small businesses and start-ups.  They include Government-backed schemes as a way of rewarding innovation, plus private schemes with selective qualifying criteria.


  • It’s a grant therefore, no repayments are required so is in effect free money!


  • It does reward innovation and relevancy so there are conditions and criteria to be met.

9. Incubators and Accelerators

Incubators are organisations or programs designed to help grow or scale new startups and entrepreneurs who have a great business idea or concept.  They will help get them off the ground by providing mentorship, guidance and a network of support to help grow.


  • They offer the funding plus also invaluable expertise and support to develop personally and also to take the business to the next level.


  • The selection process can be very competitive and you need to have something that stands out from the norm.

10. Guaranteed Loan Schemes

This a funding option for small businesses that don’t necessarily qualify for traditional bank lending.  They include schemes like the Enterprise Finance Guarantee, which is Government-backed to help smaller viable businesses looking for a loan between £1,000 and £1,000,000.


  • A good alternative if funding has been refused by a high street bank or other traditional financial institution.


  • There are stringent conditions to be met to be eligible.

In conclusion, there are a number of finance options available to you if you want to take your business to the next level, or get it off the ground.  We have selected a number of options for you here, but there are also other options available you may want to consider.

Before you choose an option we strongly advise to put a firm business plan together including detailed forecasts of turnover, costs, profit and crucially cash flow.


Nigel Carr
Nigel Carr
Nigel is a freelance financial writer and Author at Kinsella Tax. A business graduate he writes on financial matters as well as music for a number of high quality websites.
Related Articles

Comments are closed.

We're here to help you. Call 0800 471 4546 for free confidential help and advice 24/7
or fill in your details below.

    *Please do not use this form to report anyone (we cannot take any action) or to sell your own services.