Starting a new business requires careful financial planning to help it succeed.
Work out your start-up costs
Begin by listing all the expenses needed to launch your business.
Adding these up will help you estimate the total costs before thinking about how to fund your start-up.
Depending on your type of business, costs may include:
- rent, storage space, and utilities
- staff costs, such as salaries or training
- equipment and supplies
- licences and permits, any registration costs, and legal fees
- marketing and promotional costs.
Also, consider your personal financial needs.
Calculate your personal costs – such as mortgage payments, bills, and other day-to-day outgoings – to help you estimate how much you’ll need to cover living expenses until your business can pay you a salary.
See our chapter on common costs of setting up a business for more information.
Get your finances in shape
Starting from a positive financial place could help you manage your personal outgoings while you build your business.
It can also put you in a good position to secure funding.
Think about how to strengthen your finances.
This might mean:
- creating and sticking to a budget to manage cash flow and track expenses
- paying any existing debts or making plans to reduce them
- building an emergency savings fund to use if needed.
Check your credit score
A good credit score could help you get funding more easily.
In the UK, the main credit bureaus are TransUnion, Equifax, and Experian.
These bureaus offer credit reports that you can check, often for free during a trial period when you sign up for an account.
If you find any errors in your report, you can dispute them to have them corrected.
You can also improve your credit score by paying bills on time and reducing existing debt, such as bank loans.
What finance could you apply for?
There are several funding options you could consider to fund your new business.
Here are some ideas but its a good idea to seek independent specialist advice before proceeding:
A government grant
The benefits of a government grant:
Grants don’t need to be repaid and can significantly boost your business. They also add credibility due to the selection process.
What to consider with a government grant:
There are strict criteria for applying, and it can be a very competitive process.
Crowdfunding
The benefits of Crowdfunding:
You can engage people with your business before launching a product and offer rewards instead of repayment.
What to consider with Crowdfunding:
Getting full funding isn’t guaranteed, and it can take time to generate interest and funds.
A bank loan
The benefits of a bank loan:
You can access a significant amount of money with structured payment terms.
What to consider with a bank loan:
You might pay high interest rates, need a trading history, a good credit score, and some collateral
Personal savings or redundancy payment
The benefits of personal savings or redundancy payment:
You can have full control over your business without the need to repay loans, and you can use the money as you see fit.
What to consider with personal savings or redundancy payment:
Make sure you have enough money to cover your living expenses while your business grows. You could also lose your savings if the business fails.
Angel Investment
The benefits of Angel Investment:
An Angel investor will not only buy a piece of your business (known as an equity investment) but will also work closely with you to help the business grow, making use of their extensive network and business experience.
What to consider with Angel Investment:
As Angel Investors spend a lot of time engaging with a business owner they are in high demand and the process of securing Angel investment can be very competitive.
A Start Up Loan
The benefits of a start up loan:
A Start Up Loan is a government backed personal loan that’s available for people looking to start or grow a business – you could get up to £25,000 at a fixed interest rate plus a year of mentoring.
What to consider with a start up loan:
As with any personal loan, a Start Up Loan requires personal liability, meaning you are personally responsible for repayment.
Did you know?
Businesses supported by Start Up Loans have a 69% survival rate after five years, compared to 43% for similar businesses.
Tip
UK entrepreneurs can try the government’s Business Finance Support Finder
Your previously read articles
Chapter 6.3
Self-employment and benefits
Answers to common questions, with sources for more information.
Learn more about self-employment and benefitsDisclaimer: The Start -Up Loans Company makes reasonable efforts to keep the content of this article up to date, but we do not guarantee or warrant (implied or otherwise) that it is current, accurate or complete. This article is intended for general information purposes only and does not constitute advice of any kind, including legal, financial, tax or other professional advice. You should always seek professional or specialist advice or support before doing anything on the basis of the content of this article.
The Start-Up Loans Company is not liable for any loss or damage (foreseeable or not) that may come from relying on this article, whether as a result of our negligence, breach of contract or otherwise. “Loss” includes (but is not limited to) any direct, indirect or consequential loss, loss of income, revenue, benefits, profits, opportunity, anticipated savings, or data. We do not exclude liability for any liability which cannot be excluded or limited under English law. Reference to any person, organisation, business, or event does not constitute an endorsement or recommendation from The Start-Up Loans Company, its parent company British Business Bank plc, or the UK Government.
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