There are a myriad of business funding options and yet too frequently no available practical solution when you really need one. This article looks at funding for business start-up to scale-up and points you in the direction of some solutions.
It's a widely held view that if you want to start a business the fastest and probably easiest way to raise investment is by tapping into the three Fs 'friends, family and fools'. In other words, your options for getting funding for business startup are very limited, however there are one or two other possibilities that are worth exploring.
Types of funding for business
If you need an overview of the wide range of different types of business funding you can find a summary of most of them and which are appropriate at different times; plus, answers to questions such as – What is equity in business? Or – What is the difference between equity and debt investment? – at Pegasus Funding Resources.
There is a government scheme that provides loans to startup business owners, backed by £310m in UK government funding. The funding for successful applicants is provided as an unsecured loan. Find out more about startup loans here.
Incubators and Accelerators
The number of incubators and accelerators and range of services offered by them is steadily growing. They are definitely worth investigating if you are at the startup or early stage in growing your business. So check whether there is a local business incubator or business accelerator that might be able help you get your business off the ground – read more about business incubators and accelerators here.
Crowdfunding has been much publicised as a means of raising business investment at an early stage in business growth, as well as to help with scaleups. It can work wonderfully for some businesses but many businesses fail to meet their targets and it requires a significant amount of effort and skill to be successful. Before you start you need to put some time into understanding the different types of crowdfunding platform and investment options, which range from equity funding and debt/loan finance to outright donations – read more on crowdfunding here.
Grants funding for innovation
There are UK Government and European grants that innovative and pioneering businesses can sometimes tap into, such as Innovate UK and Horizon 2020. Find out more about these two sources of grant funding here: Horizon 2020 / Innovate UK.
Funding innovation using R&D tax credits
The UK Government provides funding to innovative UK companies under their Research and Development (R&D) tax credit schemes. This is a relatively easy source of extra finance you can tap into if you fit the criteria. You claim it through your annual corporation tax return, but it's not advance funding, you have to spend the money in order to claim the benefit. Companies can get back up to 33% of what they spend on innovation – read more about R&D tax credits here.
Trade and Export Finance
If you are a growing company with export orders, or seeking to export abroad you may be able to get financial and other support from the UK Government's UK Export Finance scheme, which is increasingly targeting its service at smaller business through partnering with banks. They aim to help businesses access enough working capital to expand into new territories and take on larger orders.
I've covered just some of the key business funding options and ways of funding a business from start-up to scale-up. Most businesses will need to use a mix of options to get the finance they need when they need it.