Having a great business idea is one thing, but working out how you will finance it is another. It can be a difficult process for newly independent workers to manage. Finding the right loan or working out what kind of grant you are eligible for takes a lot of time. There are thousands of options out there but often people struggle to know where to start. To help, we’ve created a guide to help kick off your search.

Grants

The UK government supports new businesses as they boost the economy and create more jobs for people. A portion of taxpayer’s money is put aside for small business grants to encourage the development of new businesses. This money then gets distributed nationally and locally via a number of bodies and departments. There are thousands of schemes available in the UK so it can be difficult to work out which will be best for your business. The government’s online tool allows you to search based on the size and type of your business as well as its location. If you’re thinking of applying, remember grants are highly sought-after and therefore take time and effort to apply for.

Key areas of business eligible for funding are: research and development, energy and the environment, apprenticeship schemes and exports.

Location can also play a big role. There are lots of location-specific grants to help support the growth of business. The National Enterprise Network offers advice and support.

Don’t underestimate the importance of mentorship and support in addition to money. Startups often struggle with a lack of resources and skill-set. Sound business advice is invaluable in any new venture, especially when you’re going it alone. Good examples are The New Enterprise Allowance and the Enterprise Programme. The latter is offered by The Princes Trust, which offers small loans up to £5000, with low repayments, plus mentoring and training.

If a grant isn’t a suitable option for your business model, there are plenty of others to explore.

Loans

Getting a loan from a bank to support the funding of your venture might seem like the most straightforward option. However, it’s a risky move and only wise to commit to if your business has plenty of cash flow to make the repayments. If you’re considering this route, check out Start Up Loans, which offer up to £25,000 for 6% interest and no repayment for 12 months. The great thing about this type of loan is that it comes with the all-important mentorship.

Equity funding

Equity funding means you sell shares of your business for funding upfront. The amount can differ depending on the type of business. In fact, Startups tend to need several rounds of funding from investors as the venture develops. Here are some examples of the types of equity funding on offer:

Incubators and accelerators

This is a great option for businesses looking for some guidance and it doesn’t come at a huge cost. As their names suggest, accelerators focus on scaling a business, usually in a set time frame, while incubators tend to focus on innovation. An accelerator is a kick-start whereas an incubator provides the space to grow. Looking for London-based incubators and accelerators.

Angel investors/ Private investors

This type of investor tends to invest in small businesses and entrepreneurs. Funding can vary from one lump sum to regular injections of money to help with cash flow. Angel investors are often affluent individuals who are looking to invest in a business, which they in turn will gain equity ownership of.

The UK government is heavily supporting this type of investment through its EIS and SEIS schemes, which offer tax incentives to small business investors.

Earlier this year, The Angel Investing Accreditation launched to promote more effective private investment in the UK by educating investors. In the US Angel Investors are required to be accredited so this new qualification, which will be accredited by the Chartered Institute of Securities and Investment (CISI), is a step in the right direction for supporting the growth of small businesses in the UK.

Venture capitalist

If you’re looking for a large sum of money (i.e. £200,000 or above) you should be considering a venture capitalist. These types of investors tend to be attracted to innovative, high-traction businesses and will have a more hands-on approach. 

A good place to start your search for an investor, both private and venture capitalists is through crowd funding sites, like EquityNet and AngelList. These websites offer small businesses access to connect with a network of investors looking for their next venture.

With so many tools at your disposal, the best way to approach funding is to look at all of the above options and apply your business to each. You will soon realise which will suit your business.