Finding funding is one of the biggest obstacles that small business owners face when first starting. Often, the challenge of raising money can seem impossible.

29% of small business owners say that starting a business has been more expensive than they thought it would be, while 30% say that having very little money is one of the main struggles they’ve faced in the first 12 months of trading. As a result, knowing exactly what funding options are available can make a massive difference to your well-being.

To help, we’ve outlined the five main funding options available to small businesses in the UK to help get your business off the ground or fuel growth. 

Bank Loans 

One of the most common avenues for small business funding is a traditional bank loan, and many UK banks offer both start-up loans and options for existing businesses. Loans of up to £50,000 are fairly common, and it may be possible for you to choose your repayment period. However, do your research carefully, as interest rates will vary. 

Government Grants

The UK Government has a range of grants available to small businesses; however, your eligibility may depend on the size and location of your business and the sector you work in. Nevertheless, it’s worth applying to any grants that fit your business as they don’t have to be repaid.  

Angel Investors

Seeking an angel investor can be a valuable way of raising money for your business, especially if you want to scale quickly. The downside to attracting an investor’s interest is that they will likely want a significant stake in your company–if you want to retain 100% control, this won’t be an option. 

Short-Term Loans

Short-term loans can be helpful if you need to boost your cash flow for a specific project or need to bridge a gap. Many banks offer loans for between one month to one year, with interest rates between 5% and 10%. If you know you can meet repayments, short-term loans can help you kickstart a project or tide you over until a critical invoice is paid. 

Crowdfunding 

Crowdfunding is a way of raising money from the public. Individuals can invest as little as £10 in a project or business, and with enough word-of-mouth interest and social media marketing, you could even exceed your investment goal. Most platforms will charge fees, though, so be sure to check the terms and conditions. 

Our Advice

Approximately eight in ten small business owners start their business with their own savings. However, there are plenty of other funding options available to small businesses. 

The funding most applicable for your business will largely depend on its size and growth rate. For example, you might not have the resources to go to an angel investor, so a short-term loan might be more appropriate. Whichever funding option you choose, do your research carefully and look out for any hidden T&Cs.