Funding fundamentals for first time founders

If you’re planning to start your first business in 2024, here’s what you need to know about funding – and why it matters.

You have decided to start your own business. First, congratulations! At Swoop we love entrepreneurs, and here’s why:

At the start of 2023 there were 5.6 million small and medium sized enterprises (SMEs), accounting for 99.9 percent of the business population, three-fifths of employment and around half of turnover in the UK private sector. SMEs make a huge contribution to innovation, variety and employment. It’s a big, brave move and at Swoop, we salute you.

How much money have you got to get going?

This is absolutely fundamental. While “regular life” is measured by many metrics such as health, happiness and catching snowflakes on your tongue, when it comes to business, there is a clear line between a company that is a going concern and one that isn’t. And it all comes down to money.

Whether this means you have saved six months of salary in your bank account or have secured funds for a management buyout or are investing in a piece of machinery, how you fund your business is important to how you get started and how you keep it going. Half of all businesses fold within five years, so getting the funding right is crucial to making sure you are not one of them.

Your number one role as founder is to manage the money. Whatever else your company does, be you a builder, manufacturer, service provider, or whatever, keeping the business solvent is your primary concern. If this isn’t something that you are good at, it doesn’t mean you can’t start a business. It just means that you have to very quickly find someone who can help you in this specific regard. An accountant or bookkeeper is probably your first hire. If you’re at your kitchen table and distracted by the housework, your first hire should be a cleaner. And maybe you should look at renting a hot desk somewhere. 

How can you get funding for your business?

In many ways, starting a business is a lot like having a baby, and it takes a village to raise a child. If you are starting from scratch, you need to understand what you are good at and what you are less good at. Where there are gaps in your talent, those are the gaps you need to fill with other people who may be very different from you. Your secondary role is therefore getting everyone to work together.

Let’s come back to funding though, because at Swoop, it’s what we do best for entrepreneurs like you.

There are two ways of raising funds for your business: either you earn it for yourself, or you get it from other people. If you get it from other people, there will be strings attached.

The most common way of getting money for your business is to borrow it. Borrowing for your business is not like borrowing for yourself. If, for example, buying a mechanical digger worth £100,000 isn’t a folly; without it, you can’t do the job, you can’t charge a customer and you don’t have a business. Think of borrowing as an investment from your future self. 

The old way of borrowing money was to go to the bank and ask them. Today, banks still lend, but there are hundreds of other lenders on the market with different lending criteria, different products tailored for specific business needs and with a different appetite to lend. For example, a merchant cash advance (MCA) is a lump sum which you pay back as a percentage of your sales, so you are not committed to paying back a set amount even when business is slow. 

What are the alternatives to a traditional business loan?

Another product we like to highlight for new businesses is the startup loan, which is up to £25,000 per company director. This is leant at a favourable rate and often comes with mentoring and professional advice to help get your business started on the right foot. 

This isn’t the place to go into all the types of finance available, but these two examples will hopefully give you the right idea: there are a lot more options out there for businesses than your existing bank. Swoop has the whole market covered and you’ll be able to access all loan options in one place.

If your business is particularly innovative or solves a particular problem around sustainability, you may also qualify for a grant. Grants are an award of money to your business, often made by region, which you do not have to pay back. Our top tips here are to bear in mind that grants are paid in arrears (ie. they are a reimbursement of cash spent, not a lump sum to get you going) and money is often paid out before the end date for applications – so get your pitch in sooner rather than later. 

Swoop has a grant finder page to make it easy for you to keep an eye on what grants will be available to your business. We are big fans of grant funding (a grant helped launch Swoop) so this is close to our hearts.

Swoop can also help you save ongoing costs such as business current accounts, energy and foreign exchange. Again, there is a lot more on the website but the principle we stick to is that the more you save on costs, the less you have to borrow for investment. Here’s one statistic: Swoop customers who switch their foreign exchange provider typically save around £7,000 per year. What would you do if you had an extra £7,000 in your bank account?

Get started with Swoop

In closing, at Swoop, we love entrepreneurs like you: your energy, enthusiasm and willingness to go out and make it happen make the world a better place. Helping you get access to the money you need to turn your great idea into a reality is what gets us up in the morning, so here’s to your success. 

Make sure you’ll always have access to the funding you need by signing up to Swoop. You’ll get regular newsletters, information on new products, webinars led by our experts and more. Get started here.