From The Apprentice to Dragons’ Den, we’ve all seen TV shows where would-be entrepreneurs pitch for funding to start a small business (or scale a company later down the line).
While these shows make for great entertainment, they can make the idea of getting investment seem rather scary.
In the real world, there are several ways to get funding to start a business in the UK, and you won’t get shouted at by leaders of industry in the process.
Whether you need a small amount to cover early setup costs or a larger investment to buy equipment or rent premises, understanding your funding options can help you choose the right route from the start.
Key takeaways
- There are several ways to get funding to start a business, including bank loans, government startup loans, grants, crowdfunding, peer-to-peer lending, and private investment.
- The best funding option depends on how much money you need, what you need it for, your repayment ability, and how much control you want to keep.
- Loans can help cover startup costs without giving away equity, but they add repayment pressure and may require a strong credit history, business plan, or collateral.
- Grants and crowdfunding may help you raise money without traditional borrowing, but they can be competitive, time-consuming, and dependent on a strong application or pitch.
- Before applying for funding, prepare a clear business plan, realistic financial forecasts, and evidence that you can manage the money responsibly.
Here’s what we’ll cover:
How to get funding to start a business
You can get funding to start a business through personal savings, loans from family and friends, bank finance, government-backed startup loans, grants, crowdfunding, peer-to-peer lending, or private equity investment.
Technology companies, manufacturing firms, and retail businesses almost always need external investment to get going, so if you’ve decided to seek third-party funding, know you’re in good company.
If you don’t have your own personal savings to invest in financing your startup, the following methods could help:
Family and friends
Getting a loan from friends or family is one of the oldest ways of financing a startup business.
Your relatives or acquaintances may either lend you the money until you start making a profit or ask for a share in your company.
The benefit of turning to friends and family is that they may lend you the money for nothing (or at very reasonable rates of interest).
But, of course, if things go wrong with your business and you can’t repay the loan, this could affect your personal relationships.
Banks
Banks are another traditional place to seek funding to start a small business. You approach the bank and apply for a business loan, then repay the amount borrowed with interest over an agreed period.
A bank loan can be useful if you want a clear repayment structure and don’t want to give away equity in your company. Some banks also offer other forms of business finance, such as overdrafts, credit cards, or asset finance, which may be more suitable if you only need short-term cash flow support or want to spread the cost of equipment.
However, banks will usually want to see that your business idea is viable before they lend to you. This means you may need to provide a detailed business plan, realistic financial forecasts, and evidence that you can afford the repayments.
Unless you have a strong credit history or collateral to back the loan up, such as property or other assets, it may be difficult to get money in this way.
UK government start-up loans
The UK government’s Start Up Loan scheme can lend between £500 and £25,000 to small businesses with an annual interest rate of 6%. The loans must be repaid within five years.
These government-backed loans do come with relatively strict eligibility criteria, though.
You must be 18 or over, be a UK resident, and provide evidence that you couldn’t raise funding through other avenues.
Grants
Grants are a way of getting free money to start a small business.
These sums are made available through a variety of government grant programmes, regional governments, universities, and major institutions (such as museums, professional membership bodies, or cultural funds).
Business grants are normally awarded to startups on a very specific basis, normally to solve certain problems.
For example, if a local council was looking to regenerate its manufacturing sector, it might provide grants to manufacturing companies to encourage more employment in their town.
Grants often come with strings attached and require a long application process. But if you can prove that you meet the requirements, this can be a great way of accessing capital.
You can find listings of new grants at the following websites:
Crowdfunding
Crowdfunding is a relatively new way to find funding to start a business.
There are various crowdfunding websites where you create a page describing what your business will do and how much money you are looking for. People on the website may then decide to provide you with small sums of money.
There are a few different kinds of crowdfunding:
- Donation: people give you money because they like the idea behind your business, with no expectation of anything in return.
- Equity: investors will ask for a share of your business in return for their investment. They effectively become your shareholders, and you’ll have to pay out dividends to them in future if the business is a success.
- Debt: with this kind of crowdfunding, people who lend you money will expect it back with interest in an agreed time frame.
Crowdfunding is especially popular for unusual or interesting startups that might struggle to access funding from other sources.
Your ability to raise funds relies on how well you can pitch and promote your idea on these websites.
FundingCircle and Kickstarter are some of the most popular sites for crowdfunding to start a business.
Peer-to-Peer (P2P) funding
Peer-to-Peer (P2P) funding is a way for businesses to borrow money from individual investors through an online lending platform rather than resorting to a traditional bank.
You apply through the platform, which reviews your business, checks affordability, and assesses the risk of lending to you. If approved, your loan may then be funded by individual investors or by a pool of lenders using the platform.
P2P funding can be useful if you want a structured loan but are struggling to access finance through a bank. The application process may also be quicker than a traditional loan, although rates and fees can vary depending on your credit profile, your business performance, and the platform you use.
As with any form of borrowing, make sure you understand the repayment terms before applying. Missing payments could affect your credit rating and put extra pressure on your business cash flow.
Private equity investment
Getting investors on board with your idea is another potential way of finding capital to start a business.
An investor will normally provide a large amount of money, which you can use to grow the company. Investors will expect equity in the business and may insist on being involved in decision-making.
There are a couple of kinds of investment:
- Angel investment: a wealthy individual provides equity finance to your business. Angel investors often get involved right from the beginning of the company’s journey. The UK Business Angels Association is a good place to start here.
- Venture capital: there are various large venture capital funds. They typically invest in startups that have already got a couple of years under their belt, but they may occasionally invest in promising new businesses. Try UK Private Capital to begin.
It can be challenging to find an investor who will provide the funds that will help you start a business, and you may have to hand over a certain amount of control to them.
That said, they’re normally very experienced running companies and can provide advice and guidance.
Which is the best funding option for a small business
The best funding option is the one that gives you enough money to launch without creating repayment pressure, unnecessary risk, or a loss of control you’re uncomfortable with.
Start by looking at what the money is for. If you need equipment, stock, or premises, a structured loan might make sense because you can match repayments against expected income. If your business supports a specific local, social, cultural, or innovation goal, it may be worth researching grants before taking on debt.
You should also think about how predictable your future income is. If you’re not sure when money will start coming in, borrowing can put pressure on your cash flow. In that case, you may want to consider options that don’t require immediate repayments, such as grants, crowdfunding, or equity investment.
Finally, decide how much control you want to keep. Loans usually let you retain ownership, but you’ll need to repay them whether or not the business succeeds. Equity investment can bring in experience and support as well as money, but it normally means giving investors a say in the future of the company.
What documentation to provide when applying for funding
As part of the application process, you’ll usually need to provide a clear business plan, realistic financial forecasts, and evidence that shows lenders or investors you can manage the money responsibly.
If you’ve found a potential source of funding for your business, make sure you read the requirements of the lender or investor in detail. They normally ask for very specific information on your application.
When you’re applying to finance a small business startup, you will, at a minimum, need to provide:
- A business plan, which explains what the business is and how you expect to grow it.
- Financial projections, which show (realistically) how you will generate income and reach break-even.
- Information about your professional and educational background.
- Details about your personal finances, including your savings, debts, and if you’ve ever filed for bankruptcy.
Why get financing to start a business?
You might seek financing for your business if you need help covering upfront costs, protecting cash flow, or investing in the equipment, premises, and people required to launch properly.
While UK startups generally resort to a mix of funding options, research from 2025 showed that 91% of them rely heavily on self-funding, and 22% turn to family or friends for financial help. So it might be easier than you think to start a business without borrowing money.
However, there are several reasons why you might want to seek external financing to start your business:
- Equipment costs: computers, vehicles, tools, or machinery.
- Premises costs: renting an office, workshop, or factory space.
- Staff: if your business needs staff so it can run effectively, you might need help to pay their salaries.
That explains why, in the same study, 12% of founders secured debt funding through a bank loan, 12% accessed UK or local government grants, and 13% attracted angel investment.
Learning how to finance a business is just one piece of the puzzle
Whether or not you decide to get funding to start a business, being an entrepreneur requires more than just startup capital.
You’ll also need to consider the administrative side of running a company and think about your mindset, too.
And that’s where our business readiness quiz helps. It takes just a couple of minutes to complete and will give you personalised guidance about what you need to do to get ready to launch and boss your business.
Dreaming of bossing your own business? Take our quiz to see how ready you are to take the plunge
Frequently asked questions on business funding
You can start a business with little or no money by keeping your idea lean, using free or low-cost tools, working from home where possible, and restricting early spending to essentials only. You may also be able to use pre-orders, crowdfunding, grants, a startup loan, or support from family and friends to cover your early costs. Before applying for funding, create a simple business plan and work out the minimum amount you need to launch safely.
Getting funding for a startup can be challenging, especially if your business is very new, has no trading history, or does not yet have predictable income. Lenders and investors usually want to see that your idea is viable, that you understand your market, and that you have realistic financial projections. You can improve your chances by preparing a strong business plan, checking your credit history, explaining exactly how the money will be used, and choosing a funding route that fits your stage of business.
The claim that 90% of small businesses fail is often repeated, but it is too simplistic. Failure rates vary depending on the country, industry, time period, and how “failure” is measured. In the UK, official ONS data for 2024 showed that 38.4% of businesses born in 2019 were still active five years later, which is closer to a 60% failure rate. However, the ONS report highlights that the reasons for failure are highly variable. Careful planning, cash flow management, and realistic funding decisions can all improve your chances of long-term survival.
There is no fixed timeline for when a startup will break even. Some businesses can cover their costs within a few months, while others may take several years, especially if they need to invest heavily in premises, stock, equipment, or staff before generating steady income. Your break-even point depends on your startup costs, pricing, profit margins, sales volume, and ongoing expenses. Creating realistic financial projections can help you estimate how long it might take and how much funding you’ll need before the business becomes self-sustaining.
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