Funding your....Start Up

When you start a business, there’ll usually be a period when you’re investing lots of time, effort and money before you start making a profit. It’s important to research your market to make sure your customers will really pay for your product or service before you do this. Look at the Business Guidance pages to help you with this.

Once you’re confident that they will, you should explore different sources of funding to help with the costs of starting up your business. Sources of funding are explained in more detail in the Types of Finance pages.

Support schemes

If you need some initial funding to test and develop your business idea, you might be able to get help from a support scheme in the form of a grant in loan, which may also come with some additional business support to help you move your business idea forwards.

You can search for local sources of support using the Advice and Grant Scheme finder.

Get a bank loan

Once you can show that there’s a market for your idea, one option for funding your start-up costs is getting a bank loan. You’ll need to be able to:

  • give the bank realistic cash flow forecasts
  • prove that you’ll be able to pay back the loan with interest

For further information on forecasting business finances, including sales, profit and loss, and cash flow go the Business Guidance pages.

The bank might require you to provide security against your loan, like your house or car, in case you don’t repay. You should think carefully about how much risk you’re willing to take on before you get a loan or give any personal guarantees.

Selling shares

If you need more investment, you might be able to raise money to fund your growth plan by selling shares in your business. You can do this by asking friends and family to invest. However, if this isn’t enough you can look for sources of ‘equity funding’, including:

  • ‘business angels’ (wealthy individuals who invest in start-up businesses)
  • ‘venture capital’ from companies who invest large sums of money in businesses that they think will grow quickly (known as ‘private equity’ companies)
  • ‘crowdfunding’ (where a large group of people invest money in a business idea, usually via the internet)
  • alternative sources of funding like ‘peer-to-peer lending’

Any outside investors will own the company jointly with you and the other founders. They have a say in the running of the company, and are entitled to get a share of the profits, known as ‘dividends’.

You should get legal advice before selling shares in your business.