26 February 2018

5 ways to finance a small business


Securing financing for your business can be challenging regardless of the prevailing economic climate, so in these uncertain times, it can be difficult indeed. However, there are some useful techniques that can help, five of which are listed below.

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Start up loan

If you’ve been trading for less than 24 months, you could qualify for the government-backed start up loan scheme. This is an unsecured loan of up to £25,000 at a fixed rate of 6%, and if approved, it comes with free mentoring for the first 12 months. The scheme can even help you prepare your cashflow statement and business plan, so that your application can be considered.

Bank overdraft

For a temporary boost to cashflow during months of low income, a bank overdraft is sometimes the simplest solution. The majority of major banks only charge interest on the overdrawn amount, and some even provide individual overdraft packages for new businesses. However, interest rates are generally higher for overdrafts, and the bank may demand it to be repaid at any time.

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Angel investors

If you’re looking for an injection of cash to expand your business, an angel investor may be the right solution for you. Angels will provide finance in return for a share of your business, and you have the benefit of their experience, too. UK startup resource, Startups, has a directory of investors for entrepreneurs to look through.


Another way of releasing cashflow is to use factoring. Factoring involves a finance company lending a certain percentage of the amount due on every invoice that your business issues. Once your customers settle their invoices, you simply pay back the amount advanced, plus any fees – usually comprised of interest, and a small percentage of the invoice itself. Local brokers often offer this service, so if you’re looking for a business finance broker in Gloucestershire, for example, firms such as http://www.choicecommercialfinance.co.uk/ may be able to help.

Micro loans

Smaller finance companies will also broker micro loans, which are typically between £5,000 and £25,000, and can be repaid between one and five years. Micro loans can be arranged to suit your circumstances, and can be used alongside other types of funding.

When looking for a finance provider and solution, make sure you have researched the providers and their credentials to ensure you make the right choice for your business.