Getting off to a good start: the Swoop guide to pre-revenue funding

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      New businesses need funding. This might seem obvious, but often businesses are initially funded from the pockets of their founders. Founders may not be able to cover the costs if they need to make a big purchase such as:

      • Premises, such as a shop, factory, office or care home
      • Specialist equipment, such as machinery, medical equipment or tools
      • Vehicles, such as tractors, black cabs or HGVs
      • Stock, especially if the stock is being bought in bulk for reasons of economy, or the stock is highly valuable or diverse 
      • Marketing, especially if you are hoping to compete in a crowded market
      • Staff, whose wages will need to be covered. They may also need to be supplied with uniforms, furniture, computers, phones and other items essential to carry out their work 
      • Technology, from hardware to ongoing maintenance costs

      If you have a great idea for a business, but can’t afford to fund it yourself, you need to get serious about finding the money to make it a reality.

      In this guide, the Swoop team will talk you through how to figure out how much funding you need and how to get it.

      Step 1: Write your business plan

      Business plans may be based on conjecture, estimates, wishful thinking and rumour, but without one, your journey to funding will stall.

      There may be good reasons why your business is pre-revenue:

      • You are building a large, complex organisation
      • You are opening a new hotel, care home or nursery
      • You are purchasing a franchise and must meet the standards outlined by the brand for marketing, equipping and stocking your venture
      • Your business relies on a considerable amount of research and development (R&D) to create a product that can compete or fill an unmet need

      Many businesses naturally have a non-revenue stage, and a business plan should show:

      • The purpose of your business and the product or service you’ll be offering
      • Information about customers such as age, location or income
      • The steps that you will take to develop a product or service and deliver it to customers, including the primary responsibilities of key personnel, business processes and running its operations
      • Market research: how many people need your business, how much are they willing to pay for it, who your rivals are and whether there are alternatives that already exist in the market
      • Legal structure, to show whether your business is a sole trader, limited company or partnership
      • How your banking and accounts are handled
      • Business name, branding and marketing, including website and social media

      Step 2: Costing your business needs

      Many of the bullet points above will have a cost associated with them. Some of these will be a flat fee, such as having a website designed and hosted, or the cost of a new vehicle.

      There will also be some ongoing costs, such as website updates and maintenance, insurance, fuel and taxes for vehicles.

      Make sure that you are realistic about these ongoing costs: if you are renting premises, for example, you may need to factor in how long you will need to cover the rent before you can comfortably pay for it out of income.

      Andrea Reynolds, Swoop’s CEO & Co-Founder
      Andrea Reynolds
      Swoop’s CEO & Co-Founder

      A word from Andrea

      “One of the biggest problems that young businesses can face is that they run out of money too early. Business owners have to avoid being too conservative in their estimates of cost for things that could bring down the whole business if the bill is not paid.”

      Step 3: Sourcing funding

      There are many ways to get funding – some are easier than others. At Swoop, we believe that businesses can benefit from a blended approach – that is, using different sources of funding.

      For example, many grants are awarded on the basis that the funds will be matched. If you have a project that costs £20,000, you may win a grant for £10,000.

      If you cannot find the other £10,000, you may have to borrow it.

      This £20,000 funding of grant plus borrowing would qualify as “blended funding”.


      This is probably the fastest way to get funding for your business before you have landed your first customer.

      There are many types of products that are open to pre-revenue businesses. The most useful are:

      Startup loans

      Under current rules a business that has been trading for less than three years may borrow up to £25,000 per director. 

      The cost of borrowing is fixed at six percent to be repaid over one to five years. Additionally, it may come with mentoring and other support services to ensure that your business succeeds. 

      These are attractive products: not only are these serious amounts of money that can make a real difference, there is support from the lender to ensure that you have the best chance of making your business a success and paying it back from your new, profitable enterprise.

      Learn more about startup loans

      Credit cards and revolving credit facilities

      A business credit card works like a personal credit card. A revolving credit facility is a pre-agreed line of credit that you can dip into when you need it – like a bank overdraft

      The high interest rates associated with these products may be off putting, but they have a place in businesses thanks to their flexibility and relative ease in getting approval. 

      Learn more about business credit cards

      Learn more about revolving credit

      You may also find that these products are useful to help your business build a credit score: this is a metric that tells other companies whether you are a responsible borrower. The better your score, the better your reputation as a borrower and you will find that if you build an excellent score, you’ll find it easier and cheaper to borrow money in the future.

      Learn more about credit scores

      Asset finance

      This is a form of finance that is particularly useful if your business needs equipment to run: this can include office furniture, tools and vehicles. 

      Rhys Cunnah, Head of Asset Finance at Swoop says:

      “Asset finance is a great choice for any business that seeks to spread the cost of purchasing an asset. It can really really help your cashflow, allowing initial capital to be used for other business-related items.”

      Asset finance is not just about getting a good price for the things you are purchasing as Rhys explains: 

      “Buying through asset finance has an additional benefit of reducing your corporation tax which will make a difference when you start generating revenue. If you need to buy assets or your business but cashflow is a problem, this is a great solution because it will free up capital that can be put to better use. Asset finance is something that you should consider from the earliest stages of a business because it will make your limited resources go further and could help you achieve profitability faster. Alongside other funding solutions, it can play into the long term health and success of your business.”

      Learn more about asset finance

      Merchant Cash Advance (MCA)

      An MCA is a relatively new form of finance which many businesses find suits their needs well. Rhys Cunnah explains how it works:

      If you’re an online business, or take most of your payments through a card terminal, a Merchant Cash Advance (MCA) could make more sense than a traditional loan. An MCA is an agreement to borrow an agreed amount at a fixed cost. There is less time pressure on the borrower because all repayments are made as a percentage card receipts through your terminal. If your sales are seasonal and fluctuate from month to month, an MCA could be an ideal finance solution for your business.” 

      As it is not a traditional loan, an MCA won’t affect your credit score. Even better, decisions are usually made quickly, putting the money in your account faster than many other forms of borrowing. So long as you have three months of revenue, you can apply to borrow. 

      Learn more about MCAs

      Commercial mortgages

      For businesses built around property, a commercial mortgage may be essential, but that isn’t the only option. Stuart Pawelczyk, Head of Commercial mortgages at Swoop says:

      “Many pre-revenue businesses will be declined for a commercial mortgage as most traditional lenders will seek the last three years’ accounts to confirm serviceability of the proposed debt. However, bridging loans can be used as a type of self-certified commercial mortgage where the exit of the bridging loan will be a refinance to a more traditional commercial mortgage lender when the forecast revenue and profit has been achieved in year 2 or 3. Other options include leveraging other assets owned by the shareholders, particularly if they have alternative sources of income too. There are a wealth of flexible funding options available in the property finance market nowadays.”

      Learn more about commercial mortgages here


      Grants are awards of money, often made to support businesses that are promoting some greater good, such as an innovative product in healthcare, energy efficiency leading to net zero, or boosting local employment. 

      Kerry Dwyer, Head of Grants at Swoop says: 

      “Grants are worth exploring as a funding oportunity because you do not have to give up ownership of part of your company as you do if you sell equity. So long as you use the money for the purpose intended, you are not answerable to investors, and getting the money in your account can be a much faster process than selling equity.”

      There are a few downsides that can put business owners off applying for grants, as Kerry explains: 

      “The application process can require a significant investment of time and of course there is no guarantee that you will win the grant, particularly if there is fierce competition. Once you have secured a grant, you do need to show that you are using the money for the reasons it has been awarded. Grant money tends to be paid retrospectively each quarter, so you need to finance the work before it will be refunded. Finally, it is very rare to find a project that is entirely funded by a grant, you will likely have to match the grant with other funding, either of your own money or another source.”

      Most grants will fund 50 percent of a project, though a few go up to 70 percent. Women in Innovation grants are the tiny minority that offer 100 percent grants – check how much matched funding you need to provide as a first step in applying for any grant. 

      Find out more about match funding here.

      Kerry says that a while industry ha grown up around mitigating the downsides of grant funding:

      “You can save time and achieve a greater probability of success by employing a professional grant writer for the application, or engage a review service to check your application before you submit. You should also give yourself the best chance of success by ensuring the grant project is completely relevant to grant competition: do your research before investing time and remember, you will be up against other companies for the same pot of money.” 

      Learn more about grants

      Equity investment

      Equity finance is the method of raising fresh capital by selling shares of your company. Equity funds can come from many sources such as business owners themselves, friends and family, venture capitalists and angel investors, or crowdfunding. 

      Learn more about raising equity investment

      Family and friends

      This may be the most common way of funding a business, especially if you are a sole trader. Family and friends may be willing to give or lend you money, equipment, tools or services pro bono to get you up and running.

      Angels/high-net-worths (HNWs)

      Each year, Angel investors contribute £850m to UK startups, forming the primary funding source for pre-revenue and pre-product startups. Thanks to attractive tax incentives to investors – they get relief on funding given and the profits generated from their investment – Angels will typically look to invest between £50k and £250k in qualifying companies. Funds are usually deployed at a quicker rate than institutional funds, given the low diligence hurdles and the fact that the final decision often comes down to one person.

      In order to qualify for these tax breaks, however, your company must qualify according to the criteria set out by the UK Government. These are known as SEIS and EIS. To make your business more attractive to investors, you should think about getting “advanced assurance” – that is, confirmation that your business meets the criteria of these schemes:

      Learn more about SEIS/EIS

      Angel networks

      Seed VCsThe key difference between VCs and Angels is that while Angels invest their own money, VCs invest on behalf of other people, businesses or institutions and because they have to answer for the decisions they make to others, VCs usually require more time, more meetings and have multiple partners involved in decisions-making.

      Competition for VC funding is fierce, but venture capital funds have started to invest earlier into startups – including at the pre-revenue stage.

      Neil Dillon, Head of Equity at Swoop says:

      “Pre-revenue businesses often fall into the pre-seed stage when it comes to an equity raise. Pre-seed investments are an ever growing category of investment. While you may not need revenue, you will need more than just a good idea for a business.”

      If you don’t have revenue, what will a VC be looking for in your business? Neil gives some pointers:

      “Founders should aim to put a great team in place, this will show investors that you, a founder, have the ability to attract good talent. You may also need to show that you have product market fit, proof that your product is solving a real problem and there are people who are willing to pay for it. You will of course need a compelling pitch deck to get these key points across.”

      Read the article, “Five things that make a business investable”.

      Crowdfunding means getting many small investors to donate a small amount of money to your business. Often this takes the form of advance orders e of software or technology: the money you receive means that you can develop plans and produce the product. Funders get the first products you produce before you take it to the open market.

      Neil Dillon says: 

      Crowdfunding can be the right approach for the right business. You will likely need to spend some thought on how you will market your product to people who are used to buying into an idea. You do need to be transparent about how long it may take to get the product made and shipped: if you over promise and under deliver, you will lose fans. There are however, plenty of examples of businesses that have got this right – and thousands of happy investors who feel they have been in at the start of something big.”

      Learn more about crowdfunding

      Why Swoop is our own best case study

      At Swoop, we like to say that we are our own best case study. If you are currently thinking about starting a business, have a great idea but limited funds, no premises and no product to show people, you are exactly where Swoop was in 2018. 

      Swoop was established as an Anglo-Irish company, to benefit from grants and tax breaks that support ventures of this nature. As the company embarked on a R&D program to build the Swoop platform, the company became eligible for R&D Tax Credits. Borrowing judiciously, the company was able to quickly put a minimum viable product (MVP) onto the market and attract investors.

      Andrea says: 

      “There are ways to start your business that put you in line to make funding easier, speeding your growth and establishing you as a main player. Swoop would not be where it is today if we had grown organically: businesses that fund intelligently across grants, equity and borrowing are at a clear advantage and businesses should be as strategic in their cash flow as they are about meeting the needs of their customers.”


      • Be strategic in your funding
      • Build your credit score
      • Look for funding across all areas: borrowing, grants and equity
      • Consider how you structure our company to ensure you are open to all possible funding opportunities
      • Ensure you do not underestimate how much you will need before your business generates revenue

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