Business Start-Up Funding – What is Available?

By Rebecca Smith, ASPIRE Project Officer, Kent Business School


Finding the right finance and funding for a new business or start-up is crucial to its success or failure.

According to recent research, half of UK start-up businesses fail in the first five years. They fail for a number of reasons. It could be that there’s little or no market for the product or service, it’s the wrong business model or is managed poorly. But one of the most common reasons is running out of money.

An accurate financial plan, profit and loss (P&L), cash flow projection and sources of income all need to be in place. It won’t only be the business’s capital costs (e.g. buying a piece of equipment) or revenue costs (rent for your office or maintenance of your app), have you also considered your living costs? You’ll be putting 110% into starting your business, but you still need to eat, pay rent and bills, and will, occasionally, want to go out and enjoy yourself.

“When you’re looking for funding be really clear how much you need before you ask for it.”

The Princes Trust help young people aged 11 to 30 get into jobs, education, and training on their website, they provide a personal finance and business costs calculator. When you’re looking for funding be really clear how much you need before you ask for it. There’s no point in trading equity, borrowing, or applying for a grant, and asking for too little just because you think it sounds better. If you then have to go back and try and negotiate more to actually achieve your goals, you’re just going to look like you don’t understand your business.

Equally, you need to be able to repay the money. If you take out a loan there will be interest on the sum or an investor may have a ‘get out’ time limit. What happens if you don’t make as much money as quickly as you thought? Scenario planning for failure, as well as success, is essential to ensure that you understand how you will meet your obligations without going out of business.

Broadly speaking, there are three ways to fund a start-up: banks, investors, grants. All have advantages, and disadvantages and all will be willing to take different levels of risk, for varying degrees of reward. Choose wisely because it’s a decision you’ll have to live with.

“Consider, are you really happy to hand over part of your business in return for investment? Can you meet the terms of repayment?”

Banks are, generally, going to need to see at least three years’ clean accounts before they lend you money. Investors or venture capitalists won’t – but they will want a larger share of any future profits in return. A grant may be free but the lending body is going to want regular reports back on how you have spent the money and that can be a time-consuming distraction from running your business. Understand what you are getting into – consider, are you really happy to hand over part of your business in return for investment? Can you meet the terms of repayment?

Before going down ‘official’ routes of funding, it may be worth considering family. On the plus side, they’re likely to share your passion for your business and will probably be more flexible about repayment. That said, it’s important to be realistic, honest and open with them about what the risks are, just as you would be with a more formal lender. They are family after all. On the negative side, will it be hard to have a professional relationship with your family, as well as a personal one? Blurring the lines can lead to falling out, and worse. Will they feel they have the right to ‘interfere’ in your business if they have invested? Can you live with that?


As mentioned, the main ‘high street’ banks are going to want to see accounts showing that your business is in good shape and at least stable, if not growing. Without those accounts, you might not get a loan, or you might find that the interest rate is higher. Some loans can be secured against property, but if you don’t repay, you could lose everything. Going further ‘off’ the high-street to less well-known banks might lead to finding someone willing to lend, but if they crash then so do you. Comparison websites such as offer a starting place for seeing what’s out there.

When your business is up and running you will find the banks more willing to lend money, and there are various types of loan which might be useful, including finance, to bridge the gap between getting that big order and getting paid for it, as well as capital loans for new equipment.


Whether they are venture capitalists, a syndicate of investors or crowd funders, they are all going to want something from you (unless you find yourself a real angel, and they’re rare).

In return for being more willing to take a risk on your business (which is likely to have little or no track record, accounts, and few, if any, customers) they will want a stake in the future profits of the business. That might be for a limited time (e.g. X amount of money for X amount of years then a payout), or it might be for an undefined length of time and in return for shares.pitchingInvestors need to understand and buy into the story behind your product or service to get interested, but they really, really need specific financial information and projections before they’ll part with any money. The same goes for a bank, grant making organisations and even your mum and dad!

You will need to be very clear what the money is for – is it a one-off cost, or to support revenue (ongoing) costs – are there milestones along the way that you can show how it will be used e.g. £5,000 will develop the app, £10,000 will launch the app, £15,000 will keep the app updated for a year etc. etc.


There are many types of grants and funds available to start-up businesses. Some are government-backed and some are charitable. All have different areas they are interested in supporting, for example, targets around job creation, or that the money will be used to make the company more environmentally sustainable. There is likely to be a long form to fill in justifying why you should get the money and regular reports back to show that you are doing what you said you would do.

More information on UK funding options can be found at the Kent and Medway Growth Hub and also on the UK Government Website. The Business Finance Guide will also take you through a quick exercise in which options are available, from a bank loan to equity release for pre-profit and pre-trading businesses as well as established firms.

Getting help and advice for free is a good way to save money. Kent County Council offers a range of services for start-up businesses including access to COBRA (the Complete Online Business Reference Advisor) which has lots of advice about different sectors of business. Other local governments do the same. An online search of where you plan to set up your business should show what’s available to whom.

Good luck and remember, if at first you don’t succeed – try, try and try again.

Many thanks to Rebecca for sharing her advice. Rebecca is the ASPIRE (Accelerator Space Innovation and Responsible Enterprise) Project Officer at Kent Business School. The ASPIRE is a space which supports student entrepreneurs in creating start-ups and responsible enterprises. Find out more about the ASPIRE Space.

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Rebecca Smith

Rebecca Smith is Kent Business School’s ASPIRE Project Officer.

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