6 ways to finance your small business

6 ways to finance your small business

Financing your business isn’t always easy! But, it can help you grow your business. Here are 6 ways you can fund your business, from using your assets to getting a grant.

Before financing your business, you should create a business plan and budget. This will help you know how much money you need! You’ll also be able to show your plan to potential investors so they can understand your business.

1. Use your savings

Using your savings to start your business is also known as bootstrapping. It doesn’t need any external financial help, you keep full control of your business!

Bootstrapping works by investing your savings into your business and reinvesting the profits in your business. To make bootstrapping work, you should start small and keep your costs low. But, there’s personal risk involved should the business fail.

2. Get a loan

There are lots of different types of loan available to help you start your business. The most common is a loan from your bank, either as a short or long term solution. But, there are other types of loan available specifically for small businesses. For example, the government has a Start Up Loans scheme where you can borrow up to £25,000.

When you’re taking out a loan, you should make sure that you’ll be able to pay back the money you owe and interest.

3. Try crowdfunding

Crowdfunding is a simple way to get funding for a one off project. You set an amount you’d like to raise, and a time period to raise it over. You offer the people who pledge you money incentives, like your new product when it comes out.

Crowdfunding isn’t a long term way of financing your business and there are no guarantees you’ll raise the money, but it could offer a solution for getting a new product launched.

4. Invoice finance and asset finance

Financing the assets you already have can give you more liquid cash to get your business moving.

Invoice finance is when you borrow the money from unpaid invoices upfront, instead of waiting for them to be paid. The downside is paying a small fee, usually a percentage of the invoice amount.

Asset finance is either borrowing money against the value of assets your business already owns, or using finance to purchase new assets. There are different types of asset finance available depending on whether you want to refinance your assets, or buy new ones.

5. Business grants

There are lots of schemes across the UK that offer grants to small businesses. Unlike loans, you don’t need to pay back grants, but there might be limitations on what you can use them for. But, for a lot of grants, you’ll also get business mentorship to help you grow.

There’s a lot of competition and you’ll need to fit the provider’s criteria, so it isn’t guaranteed you’ll receive one. The government website has a list of different grants available in the UK.

6. Find an investor

Getting an investor can help finance your business, but you may have to give up some control. There are different kinds of investment you can choose from.

Angel investors can offer a large amount of funding for a stake in your company. They can offer you support and mentorship too.

Venture capital is another investment option, offering much higher funding than angel investors. They will require seats on your board in exchange for their investment. One example is the Enterprise Investment Scheme (EIS) is a government backed venture capital scheme to help businesses raise money.

Manage your business finances with Bokio

Choosing the right accounting software can help make managing your finances simple.

Bokio’s free bookkeeping, invoicing and expenses software has everything you need to manage your business finances in one place. We have everything you need to help you prepare for your Self Assessment tax return, submit your VAT Return for Making Tax Digital and keep the right financial records. If you need an extra hand, we can help you find an accountant to work with.

Accounting is kept simple with Bokio, so you have more time to spend running your business.