Funding options for new-start businesses

Whether you’re a new, early-stage, or established business, you’ll need capital to set up or scale up your operations. 

There are three ways to finance your business: borrow money, sell an equity stake, or bootstrap your way to growth.

Debt remains the most popular form of finance for UK SMEs. The British Business Bank calculated 90 per cent of all external business finance in 2019/20 was through debt, driven by owners who are keen to maintain control over their business. 

Established businesses can provide their financial accounts to lenders, but what should new businesses - with limited or no trading history - do?

Create a solid business plan

Provide lenders with a clear plan that gets to the heart of your business–what it does, how it works, and what makes it different. 

It’s vital to show how your knowledge and skills are a good fit for your planned activity. 

Fundamental to every business plan is research–learn about your target customers, understand market trends, and know what your competitors are doing.

Prepare a robust cash flow forecast

Cash flow is the lifeblood of small businesses–it’s cash flow from operations that repays loans. 

Lenders will assess if the forecast is consistent with your business plan, whether realistic assumptions underpin projections, and if it stacks up against their knowledge of your industry.

Know what you are applying for

Explain what you need and how funding will help you reach your business goals. 

Take time to understand loan terms and conditions to make sure the offer is right for you and your business.

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