The most suitable finance option for your business depends on many things, including:
- how much funding you need
your current business revenue or if you’re a new business
- whether or not you’re willing to offer personal assets as security – this can make it easier to get funding but is risky if you’re not able to maintain payments
- whether or not you own a business property – this can make it easier to get funding
- whether or not you’re willing to sell shares
Find out more about business finance options or search for finance schemes in your area for your type of business.
The business finance and support finder has a list of public funding (eg government schemes) available in the UK.
Key points to consider when seeking funding
There are a number of things you should consider before approaching anyone for funding for your business:
Is your business plan up to date? Most investors and lenders will want to see your business plan, to understand your vision and explain how you're going to spend the invested or borrowed money.
- Why do you need funding? For example, do you need money to start your business, acquire an asset, manage your cashflow or grow your business?
- How much funding do you need and for how long? Some finance options, such as overdrafts, are useful for day-to-day expenses and improving cashflow for a short period of time, while loans are more suitable for long-term funding.
- Can you afford the repayments? Remember to consider the cost of interest, fees and other charges associated with loans.
- Can you provide any necessary security? Security can be any business or personal asset, such as business premises, large items of machinery or stock.
- Are you prepared to give up a share of your business to an investor? Consider getting equity finance from business angels, venture capitalists or friends and family.
How to make your business attractive to investors
Whatever type of funding you're seeking, you'll be expected to have a business plan. It should be one of the most useful tools for helping you to manage your business.
You should also consider:
- sales, profit and loss, and cashflow forecasting
- identifying potential risks and how you might overcome them
- a SWOT analysis to identify strengths, weaknesses, opportunities and threats
When approaching investors, grant providers or lenders you should have a well-rehearsed presentation about your business, where you are clear about your plans and goals, as well as explaining what you need funding for. You should be prepared to answer detailed questions about your business.
In general, potential lenders and investors will be looking for:
- ambitious but credible financial information
- a strong management team
- good market knowledge
- a clearly-defined exit route
- evidence you can meet your repayments in respect of any borrowing
Grant providers will also want to ensure your business is a worthwhile investment, that you meet their criteria and can achieve your goals.
Investors will want to ensure they'll be able to recover their investment and take any profits. They'll want to know what your long-term plans are. They may place greater emphasis on your business' level of ambition.
Investors are likely to ask about:
- the type of products or services that your business provides
- what distinguishes your business from others in the same market
- any existing customers
To start a new business, you'll need enough money to cover both the start-up and early stages, at least until your business starts providing an income. You should prepare:
- a detailed business plan, identifying how much money you need and when
- a realistic profit and loss forecast covering a range of scenarios – many new businesses forecast over-optimistic sales
- a personal budget, taking account of personal living expenses that you'll need to fund from your business
Most people who start a new business will have to use some of their own money, as well as any funding secured from elsewhere. There are benefits to self-funding your business, including:
- having more control over your personal and business finances
- not having to repay money
- making your business more attractive to potential investors, by showing your own commitment to making the business succeed
If you need extra funds to finance business growth, you should first review your current performance and prepare detailed business plans and cashflow forecasts. Any potential funder will be looking for you to demonstrate that your plans are realistic and achievable, and that you have realistic financial projections.
You may be able to self-finance your growth objectives by releasing money from your business. Improving your cashflow could be one way of achieving this. Read our guide on cashflow management.