If you are looking to start your entrepreneurial journey, the UK might be the best place to start!
With its primed infrastructure, diverse talent pools, and funding support, it is no surprise that the UK managed to nail its spot as one of Forbes’ “Top Countries for Business” in 2018 and raised over £17.2 billion from Venture Capital funds for startups in 2021 alone.
But no matter how great your business plan, team, and strategy are, it is only possible with funding. Before you flood your monitor with search tabs, we decided to do the work for you by compiling the top 6 ways to get startup funding in the UK.
1. Government Startup Loan Scheme
The government initiated the Startup Loan scheme in 2021 to revive entrepreneurship in the UK. It comprises a £500 to £25,000 personal loan at a 6% fixed interest rate per year to be repaid within one to five years.
To be eligible, business owners must prepare and submit their cash-flow forecast along with a well-curated business plan as proof that you, as a startup, can pay the set monthly payments. On top of that, if you satisfy all the requirements and get approved, your business will get paired with a business mentor in the first year of the agreement (think of it as a temporary second brain to your business).
2. Angel/Venture Capital Funding
With £20 billion invested in over 2,500 UK businesses using VC investment funds from 2011 to 2019 alone and 650 members of the UK Business Angels Association, it is more to possible to fund any business.
Though most might think reaching out to VCs and/or Angels directly may be the way to go, we highly recommend using a startup advisor to act as the bridge between your startup and these investors. Doing so helps your company have a likelier chance of securing funding regardless of its stage.
3. Crowdfunding
Ask the right way, and you will receive it. Crowdfunding serves two purposes: 1) Raising capital and 2) Marketing, and it is often opted for by those looking to invest in the early stages of the business.
Popular crowdfunding platforms such as Indiegogo and Kickstarter are prime examples of where startups in the UK can pitch their business idea to potential customers and earn revenue from selling their products. These platforms guarantee a specific number of sales once you get your product on the market.
However, if your business is strictly looking for investors for its venture, platforms such as Crowdcube and Seedrs might be the better option to get funding for startup. They focus on connecting your business to investors rather than customers.
4. Peer-to-Peer Loans
Peer-to-peer (P2P) loans are essentially cousins to crowdfunding but have a twist of their own: You must pay these loans back to the lender. Though this funding type is a relatively new concept embraced over the last decade, it has become a popular choice among business owners to fund a startup company.
In fact, Funding Circle was the first P2P lender in the country, opening its doors in 2010. As the name suggests, the P2P lender aims to act as a bridge between small businesses and investors, providing up to £500,000 in unsecured business loans to get them up and running.
5. Innovation Grant
Obtaining this innovation grant can be tricky due to its high competitiveness. This particular startup funding type is tailored to stimulate growth in tech startups. However, if you are a tech company that checks all the boxes, then this grant can be instrumental in transforming your business idea into a viable venture.
The innovation grant is highly regarded. In addition to receiving startup financing through this grant, you and your business will be more likely to earn the trust and interest of VCs and Angel investors who know what it took for your business to get approved.
6. Friends and Family
As a new business owner with little to no track record in the business world, you know how challenging it can be to secure traditional funding sources, but this is where having a good relationship with your friends and family can come in handy.
The major upside of this funding source is its flexibility regarding repayments and the lack of need for stringent background checks. However, when it comes to money, friends, and family, there are a handful of considerations to make before choosing this source.
For starters, depending on your network, it is less likely to provide you with a significant form of capital for your business than other funding forms, such as VCs or loans. When you “borrow” money from people you hold dear, you must ensure they make a fully informed decision and understand the risks involved (e.g., they might not get a return on their money lent).
Remember, these are your friends and family with whom you have a relationship. Collaboratively setting the “terms and conditions” is key to keeping the personal from the business.
Kickstart your Startup in the UK
Whether you decide to bootstrap or consider one of the common funding sources above, there is no such thing as the best. The answer to the right funding source most often lies and depends on which funding source best suits your current business needs.
Planning for funding is one thing, but planning post-funding separates a successful startup from another; that is where Omega steps in.
We go beyond just helping businesses in the UK off their feet through our multi-currency account; we can also help you get your company registered, legalised, and financially set through our accounting services, to name a few.
