Start-up finance

Quick facts

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

Let’s say you’re a start-up 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 start-up 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 start-up 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 card, purchase order finance or other types of working capital finance.

If you’re looking for longer-term finance then a start-up loan is one option. There are a large number of lenders (bank and non-bank) who offer loans to start-ups or new businesses. 

You might find, however, that your business doesn’t currently meet the lending criteria for a start-up loan (or for any longer-term business loan for that matter). Or perhaps you just don’t want to take out a traditional loan. You could instead investigate crowdfunding, peer-to-peer lending, business angels, venture 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, e.g.:

  • Tax relief – the government’s tax incentives for businesses in specific sectors, e.g. R&D tax credits and creative industry tax relief
  • Business rates relief – if your business occupies only one property, and the rateable value of that property is less than £15,000
  • Employment Allowance – which can reduce the national insurance contributions you pay for your employees by up to £3,000 per year.

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. 

Don’t waste time – there are plenty of funding and saving solutions to help your business grow

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