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How to get money to start a business
5 min read

How to get money to start a business

Starting a business is an exciting but challenging venture. Whether you’re an aspiring entrepreneur or an established small business owner, securing funding to start or grow your business can be a daunting task. In this article, we’ll explore various ways to get money to start a business, including loans, grants, and cost-cutting measures.

What are the typical startup costs?

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.

Startup costs calculator

We've put together some of the typical things you'll need to invest in when starting a business. Fill in the business startup costs below to find out how much money you'll need to get up and running.

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How to receive funding to start a business

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.

How to get free grant money to start a business

Grants are another source of funding that can help you start or grow your business. Unlike loans, grants do not need to be repaid, making them an attractive option for entrepreneurs. 

It’s important to note that the eligibility criteria for grants can be strict and may vary depending on the specific grant program. It’s important to research the requirements thoroughly and ensure that you meet all the necessary criteria before applying.

Here are some options to consider:

  • UK government grants for new businesses

    The UK government offers a range of grants for new businesses, such as the Start Up Loans scheme, which provides loans of up to £25,000 with a fixed interest rate of 6% per annum. The New Enterprise Allowance is another scheme offered by the government that provides financial support and mentorship for individuals starting a business. This scheme provides a weekly allowance of up to £1,274 over 26 weeks, as well as a loan of up to £25,000.

  • Welsh government grants for new businesses

    The Welsh government also offers grants for new businesses, such as the Business Start-Up Grant, which provides up to £10,000 for eligible businesses. This grant is available for businesses located in certain areas of Wales, and the funding can be used for things such as capital equipment, website development, and marketing materials.

  • Private sector grants

    Private sector organisations, such as charities, trusts, and corporations, also offer grants for new businesses. Look for grants that are specific to your industry or location. For example, some organisations may offer grants specifically for businesses that are focused on environmental sustainability or social enterprise. It’s important to research these opportunities thoroughly and make sure you meet the eligibility criteria before applying. Here are some examples:

    1. The Prince’s Trust Enterprise Programme: This program provides funding and mentorship for young people aged 18 to 30 who are starting a business. The Prince’s Trust offers grants of up to £5,000 to eligible applicants.

    2. Shell LiveWIRE: This program provides funding and support for young entrepreneurs aged 16 to 30 who are starting a business that addresses environmental or societal issues. Shell LiveWIRE offers a range of grants, including a £5,000 Smarter Future Award for businesses with innovative solutions to sustainability challenges.

    3. Santander Foundation: The Santander Foundation offers grants to UK registered charities and non-profit organizations that support disadvantaged people in local communities. The foundation provides grants of up to £5,000 for eligible projects.

    4. Nesta Impact Investments: Nesta Impact Investments is a venture capital firm that invests in businesses with innovative solutions to social and environmental challenges. The firm provides seed funding and follow-on investment for businesses that are working to make a positive impact.

How to apply for grant money to start a business

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:

How to get a business started with no money

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.

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