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How to finance a new business

Setting up a new business isn’t cheap. There is a cost incurred for everything, from registering your business to buying tools to finding premises for your business and promoting yourself.

But what are the options available for financing your company? We highlight the major areas to consider when trying to fund your new business.

How to finance a new business

Savings

You might choose to fund the beginnings of your business using personal savings. This could be to help pay for equipment you need to set up your business, or it could be used to help support you financially as you make the transition into self-employment.

It’s important to note that while using your savings is always an option to help support and start a business, this could leave you at financial risk if something was to go wrong.

Investors

Another way to raise money for your business is through investment. This is where people can buy a stake in your business in return for funding and, hopefully, a return on that investment in the future.

Investment can help get a new business established or it can help to stimulate a business’ growth. It’s important to work out how much funding you will require for your business to grow or achieve a goal and work towards securing that.

Investment can come from a number of sources. This includes friends or family wanting to support your business and investment bankers. Fund managers might also seek to back your business in order to secure future profit for their clients.

It isn’t always easy to secure investment. You might operate in a sector that has few investment opportunities or traditionally doesn’t receive this sort of funding. However, there are still other options available.

Loans

Many banks offer small business loans, often extending these to start-ups to help get them off the ground. These loans can often be repaid simply, with repayments tied to transactions or as a direct debit each month.

Aside from loans provided by banks, the government also provides access to a range of financial solutions designed to help small businesses and start-ups develop.

Government Funding

The government provides new businesses with access to start-up funding. Start-up loans range from £500 to £25,000 and can help a business get established, covering the initial costs of purchasing equipment and getting ready to begin trading.

Another government option are start-up grants, which are non-repayable lump sums made available to businesses. These grants have to be applied for, so it isn’t guaranteed that a business will receive the funding they can provide.

There are many grants to choose from, ranging from schemes to help encourage businesses to take on apprentices or fund training to helping with building repair or promoting growth. The government website contains a list of the different grants available to businesses. However, it is important to note that many grants are limited by a business’s size, sector or location.

Crowdfunding

If your business depends on the launch of a new product that you want to bring to market, it might be worth pursuing crowdfunding as an option. Websites like GoFundMe or Kickstarter allow members of the public to donate or ‘back’ a project, in return for early access or specialised rewards for backers.

You should explain what the funding will cover – either for securing intellectual property rights, or getting a product into mass production, for example.

However, it’s important to note that if a crowdfunding event doesn’t reach its goal, such as raising a set amount of money in a month, you will receive none of the funding. So this is only an option to consider if you feel you have a product to bring to market that you think can deliver on the promises you make during your campaign.

How can FSB help with my new business funding?

Getting a business up and running smoothly is crucial and being able to secure adequate funding to enable this can be time consuming and difficult.

FSB Business Creation provides people looking to establish their own business with access to a range of services designed to help and support new start-ups. This includes help and advice on a range of issues, including financing.

The FSB Business Creation service also provides new businesses with access to:

  • Help with company formation
  • A dedicated help and advice line
  • Insurance services
  • Payment services
  • Networking support

To find out more about how you could benefit from FSB Business Creation, get in touch with a member of the team or visit our FSB Business Creation page.

FSB Cash Advance from FSB

A risk-free way of raising finance for your business, which is not secured to your assets, giving you the cash injection you need, when you need it.

Find out more