How to get money to start a business

Before we delve into funding options, it’s essential to understand the typical costs associated with starting a business. Here are some of the most common expenses:

• Product or service development costs: This includes costs associated with developing your product or service, such as research and development, prototyping, and testing.
• Equipment and supplies: This includes purchasing or leasing office space, equipment, software, and supplies necessary to run your business.
• Marketing and advertising: This includes website design, business cards, brochures, digital marketing, and other promotional materials.
• Professional services: Professional services such as accounting, bookkeeping, and consulting can help you manage your finances, plan your business strategy, and ensure compliance with regulatory requirements.

It’s important to note that the costs of starting a business can vary greatly depending on the type of business you want to start and the industry you’re in. To get a better understanding of the startup costs for your business idea, you can use our startup cost calculator below. This calculator will help you estimate your initial costs and plan a budget for your business. By understanding your startup costs, you can make informed decisions about funding and financing options.

Once you have a clear understanding of your startup costs, you can start exploring funding options to finance your business. Securing funding can be a significant challenge for new businesses, as lenders and investors often prefer to fund established businesses with a track record of success. This is because new businesses are seen as riskier investments due to the lack of proven business models and revenue streams. However, there are still funding options available to new businesses, and here are some of the most common:

1. Overdrafts: Many banks offer overdrafts as a short-term financing option for small businesses. However, overdrafts can be expensive due to high-interest rates.

2. Credit cards: Business credit cards can be used to fund small expenses and can help build credit history. However, they also come with high-interest rates and can lead to debt if not managed carefully.

3. Friends and family: Borrowing from friends and family is a common way to get funding for a small business, but it’s essential to establish clear repayment terms to avoid damaging relationships.

4. Government grants: There are a range of government grants available for small businesses in the UK, including start-up grants, innovation grants, and export grants. However, the application process can be competitive, and eligibility criteria can be strict.

5. Bootstrapping: This involves using personal savings or revenue generated from the business to finance its growth. This can be a slow process, but it allows business owners to maintain control and ownership of their company.

When applying for funding or grants for your new business, you will need to have some financial documents prepared. These documents will help demonstrate to potential lenders or grant providers that you have a solid plan in place and that you are capable of managing the finances of your business effectively.

Here are some of the financial documents you may need to provide:

• Business plan: This is a written document outlining your business objectives, strategies, market analysis, and financial projections. It should also include information about your target market, products or services, marketing and sales strategies, and management team. A strong business plan can help convince lenders or grant providers that your business is worth investing in.
• Budget: Budgeting in business is a financial plan that outlines your projected income and expenses over a specific period, typically a year. It is an essential tool for managing your business finances and can also be used to demonstrate to lenders or grant providers that you have a realistic understanding of your financial needs.
• Balance sheet: A balance sheet is a snapshot of your business’s financial position at a specific point in time. It shows your assets, liabilities, and equity, providing a clear picture of your business’s financial health.
• Profit and loss statement: A profit and loss statement, also known as an income statement, shows your revenue, expenses, and net income over a specific period. It is an essential document for understanding your business’s profitability and financial performance.
• Cash flow statement: A cash flow statement shows how cash flows in and out of your business over a specific period. It is a critical document for managing your business’s cash flow and ensuring you have enough funds to meet your financial obligations.

In addition to these documents, you may also need to provide tax returns, bank statements, and other financial statements or documents as requested by the lender or grant provider.

Remember that the more prepared you are with your financial documents, the more likely you are to secure the funding or grants you need to start or grow your business. Check out some of our downloadable templates:

• Balance sheet example
• Small business budget template
• Profit and loss account example
• Cash flow statement

It may be that you’re unable to raise money for your business venture, but that isn’t always a blocker. Starting a business with no money may seem like a daunting task, but it is possible. In fact, many successful businesses were started with little to no initial investment. However, it’s important to note that starting a business with no money will require a lot of hard work and dedication, as well as creativity and resourcefulness.

Here are some tips on how to start a business with no money:

• Identify your skills, talents, and passions: Consider what you are good at and what you enjoy doing. This will help you determine what type of business you can start without having to invest a lot of money upfront. For example, if you have a talent for finding products you can buy cheap and sell high, consider starting a reselling business.
• Research and find low-cost or free resources: Utilise free online tools to build your website, create marketing materials, and manage your social media accounts. Consider cheap digital marketing tactics like email marketing and social media advertising to promote your business. You can also advertise for free by utilising social media platforms and local classifieds.
• Focus on generating revenue as soon as possible: This may mean starting small and offering a limited range of products or services initially. As you generate revenue, you can reinvest it into the business to grow and expand.

By following these tips and utilising your creativity and resourcefulness, you can start and grow a successful business without having to invest a lot of money upfront.