Funding your business


The article below was first published in Making Money magazine, July 2016 edition. provides a guide to funding a new business which can be a challenge.

Support for start-ups

Trevor Johnson provides a definitive guide to the grants, loans and guidance available for aspiring entrepreneurs

You have a great idea for a business, but how do you know it hasn’t been tried before? If it proves to be a goer, how can you raise the start-up money? Could you cope with day-to-day management? And who will you turn to when things go wrong?

It’s worrying imponderables like these that stop at least 20 per cent of budding entrepreneurs from turning their dreams into reality, according to recent research by the London Business School.

Liverpool start-up adviser Leo Morrison says: “There has never been more start-up and small business information, guidance and advice available, especially online. But how do you know it’s impartial?

“Government websites like Great Business will give you a broad picture of government initiatives and what other help is available, so you can narrow down what is likely to be most useful to you. However, shop around before making any important decisions.”

Consultants have found that most of the cries for help from start-ups usually centre around less than half a dozen basic subjects. So if you’re looking for information and guidance, these established sources should help:

Where to get advice

The good news is the UK has a very supportive start-up environment with a wealth of groups, networks and organisations for all types of new and growing businesses. Here are some of the most successful:

  • National Enterprise Network provides a wide variety of services offering independent advice, support and training for starting or developing a small business. It’s an organisation of mainly not-for-profit bodies providing impartial advice.
  • New Entrepreneurs Foundation provides mentoring, events and work placements. Each year at least 30 aspiring newcomers are selected to take part in 12 months of intensive business training.
  • School for Startups has a comprehensive programme of educational events and online support. The Start Up Loans Company has helped many hopefuls find funding and finance.
  • Women in Enterprise is a website offering support specially tailored for women starting their own businesses.
  • Shell LiveWIRE is an online community for young entrepreneurs aged between 16-30. In the past 30 years it has helped nearly 900,000 young people and provided over £5 million of funding.
  • Enterprise Nation has a mission to inspire would-be entrepreneurs with a range of events and information in a network involving 70,000 start-ups and small businesses.
  • The Forum of Private Business is a leading small business support group dedicated to helping business owners focus on growth and profitability.
  • The Federation of Small Businesses is a membership organisation helping and representing small firms and offering advice and expertise. It regularly makes recommendations to government.
  • British Chambers of Commerce, founded in 1860, has 52 branches across the UK and represents over 90,000 businesses of all sizes and types.

 Funding those new ideas

It can be costly and time consuming to research and develop a new product or service, but there’s financial help at hand, ranging from tax relief and credits to grants and vouchers. For instance:

  • Innovate UK smart grants provide funding for small companies to carry out development projects. Grants are often available to assess potential markets and develop prototypes.
  • Growth Showcase is an invitation only web platform that showcases high growth small businesses to possible investors. The service is free and companies can ask to join on the website.
  • Small Business Research initiative provides opportunities for recently started small companies to offer technology developments to public bodies acting as lead customers.

 The Patent Box offers a new corporation tax rate for companies trying to market newly patented inventions.

 Grants and loans

There are many different types of finance available – if you know where to look. In fact, it’s estimated £100 million a year is available in grants to start-ups and small businesses, but half goes unclaimed.

So what is this money and how do you get it? Here are some of the most common sources:

  • Direct grants. Usually given for training, employment, export development or capital investment and involve putting in around 50 per cent of the cost.
  • Repayable grants. Cash funding that’s often conditional on being repaid out of future revenue. If the project fails, the grant can often be written off.
  • Soft loans. The terms of repayment are more generous than usual, with little interest and a long repayment period.
  • Equity finance. The fund provider takes an equity share of the enterprise. When the value of the business increases, the stake can be returned.

Looking for loans? Here are some of the best current sources for start-up and small business finance:

  • The Start Up Loans scheme was floated with £117.5 million of government money and has been approached by over 10,000 hopefuls under the age of 30. Loans usually average £2,500, but can be as much as £5,000 in some circumstances.

This year about £60 million will be available to young entrepreneurs through the Start Up Loans Company. Successful applicants are assigned a delivery partner, who helps develop a business plan.

  • The Prince’s Trust Enterprise scheme is another possible source of loans, but to be eligible you must be in a target group that includes the long-term unemployed. Recent successful applicants include a hairdressing salon and a workshop for DJs.

Since 1983 the trust has helped over 80,000 young people to start their own businesses with loans of up to £7,500.

Does your local authority give start-up and business development grants? If you’re in a high unemployment area, enquire about enterprise grants, which are one-off payments for small businesses investing in assisted areas. Find out what’s available and who to contact.

The UK Business Funding Centre is an independent research organisation giving guidance on what government money is available for small business loans and grants. Over 600 schemes and £9.5 billion in funding is currently available.  

Where else can you look? There is no single list of UK grants, but the website sets out who is eligible, how to apply for government grants and why applications might be rejected.

 If you need more help

 If you feel assistance from big organisations is not personal enough, it could be time to look for a mentor. The right person can give you honest and constructive feedback, as well as providing useful contacts and passing on invaluable experience.

Here are some organisations to contact:

  • Meet a Mentor are free events run by the Institute of Enterprise and Entrepreneurs. Some of the events are tailored to aspiring businesswomen and mentors volunteer their time to advise and support.
  • Mentorsme offers businesses access to a list of quality assured mentoring organisations across the UK.
  • Social Enterprise Mentoring is part of the Prince’s Trust business in the community programme and puts new entrepreneurs together with experienced business leaders to develop start-ups and small companies and create jobs.
  • Great Business mentoring provides a total of 27,000 mentors, who give up an hour of their time once a month. Further paid advice is often available.
  • MicroMentor is a free online social network connecting young entrepreneurs and volunteer mentors.