7 Great Ways to Fund your UK Small Business

For startup and small business owners, you need to find as many ways as possible to fund your venture. In the UK alone, half of all start-ups fail within five years with owners blaming everything from the UK tax system to a lack of bank lending. In fact, there is now even a website dedicated to startups that have flopped where you can track their idea, reason for failure and ‘autopsy date’.

It’s clear that it’s not easy to succeed when part of a small business, but what more can you do to fund them except ask your mate in the pub for an extra few quid? Well, that’s exactly why we’ve complied this list of 10 great ways to fund your SME. Take a look:

1. Friends & Family

Referring back to my previous, rather flippant, comment about lending money off your friends, it’s not actually a bad idea and it’s how many of the most successful start-ups have begun.

However, the most crucial part of this method is that you are very clear about the ‘lending’ situation and that you make a strong distinction between borrowing and taking. If your mother is willing to give you the money outright then great, but make sure she knows that she may not ever get it back or you will be in big trouble!

One of the reasons that this method is so popular is that it prevents you from going to a bank or company and actually applying for a loan, which can be very daunting.

2. Short term loans

Short term loans have become more and more popular over the years but there is pros and cons to this funding method. A short term loan is one that is due to be repaid in under one year and they are handy for when your business doesn’t qualify for a line of credit from the bank.

As with all loans, you should do your research and shop around before committing to anything. Remember to ask yourself the following questions before applying for a short term loan: How much do I need? Can I get the same amount from another method? Do I actually need a loan at this current moment in time?

3. The bank


Since the recession, which has cast a negative image of bankers over recent years, a lot of banks have desperately tried to increase trust by offering inviting incentives.

Now that banks are willing to lend money to small businesses again, it’s a great opportunity to fund your SME. But once more – ask yourself if you have the cash flow to repay the loan, will the money actually help your business grow or is it merely covering routine expenses? Will you find yourself in the same situation a year down the line?

4. Start Up Loans

Start Up Loans is a government funded initiative aimed at startups (funnily enough), small businesses and entrepreneurs. After registering online and working with a Delivery Partner, you will receive your loan and access to free mentoring if your application is approved.

With the ability to lend up to £25,000 at a 6% interest rate, Start Up Loans is a really great scheme to consider whether you’re in ecommerce, marketing or offer services.
Any UK resident whom is 18 years of age or older, has a business idea but has been in trading for less than 2 years can apply.

5. Peer-to-peer lending


According to the government, it is estimated that in 2013 £193 million in loans were extended from one business to another. A massive 203% growth from 2011.

It’s crazy to think that one way of funding your own business is to borrow money from another one but it’s more popular than ever in 2015.

Too good to be true? Well of course it comes with a catch – the lender will ask for something for in return and critically, peer-to-peer websites aren’t covered by the official Financial Services Compensation Scheme

6. Crowdfunding

What is it? Put simply, crowdfunding is the act of funding your business venture or individual project by raising money from interested donators (usually) through a website. Once you’ve pitched your idea online, anyone can donate money towards your overall target. You will tend to receive lots of small amounts of money from many investors. Rather than the whole total by one individual.

When it comes to crowdfunding websites, there are two separate types – equity and reward.

For equity crowdfunding sites, those who donate money to your cause will receive a share of your business, whilst on the reward platforms such as Kickstarter or Indiegogo they will instead receive some form of non-financial reward.

Need to get your crowdfunding campaign some traction and you’ve already posted links to it on all your social media channels? Try getting in touch with journalists in your niche and contacting them through email and/or Twitter.

Don’t make it hard for media outlets to pick up your story. Make sure you have your press release, a list of key points, a set of striking images and a few quotes from yourself ready to give yourself the best chance.

7. Business accelerators

Many new entrepreneurs are head over heels about small business accelerators that offer funding and mentoring in return for equity. They also offer space for your business to flourish. What’s not to love?

Critics will say that business accelerators prey on vulnerable startup owners and that they’re killing the opportunity for them to be self-sufficient. However the argument is simple“It accelerates your business. You can do in three months what will take you 12 months outside an accelerator. You save yourself nine months’ worth of pain and efforts.” Says Simon Jenner, CEO of Oxygen Accelerator

Whilst most of these accelerators are located in London, their popularity means that they’re beginning to appear all over the UK.

What small business funding method do you think is the most successful? Did we miss anything more effective out? Let us know by tweeting us @Perabusiness

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