Startup finance

Quick facts

Startup finance is a broad term that refers to any kind of finance (i.e. debt financeequity finance or grant funding) that a startup business might need in order to launch and grow. It’s sometimes used interchangeably with ‘seed capital’, though startup finance is usually a longer-term arrangement.

Let’s say you’re a startup business. You’ve got a great idea. You might also have a team in place, a business plan, a budget and a figure for the amount of finance you need in order to meet your short-term needs and grow. You might decide you need funding for, say, three years to cover development costs and startup losses. Perhaps you’ll need finance even after you’ve reached break-even point, especially if your business is seasonal.

The good news is that there are lots of options for startup finance, spanning debt finance, grant funding and equity finance from crowdfunding or external investors.

For short-term finance you might consider an overdraft (paying interest only on the amount you’re overdrawn each day), factoring (selling accounts receivable), a credit cardpurchase order finance or other types of working capital finance.

You might find that your business doesn’t currently meet the lending criteria for any longer-term business loan . Or perhaps you just don’t want to take out a traditional loan. You could instead investigate crowdfundingpeer-to-peer lendingbusiness angelsventure capital and other types of alternative finance. Your business might also be eligible for grant funding or for one or more of the government’s schemes to reduce taxes. Your finance needs will inevitably change as your business grows – as will the types of finance options open to you. It’s worth exploring all options and regularly speaking to a professional before you commit to any financing route. 

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