Small business funding – how to get a cash boost for your business

If you’re an up-and-coming entrepreneur, you’re going to face the challenge of getting investment for your small business.

Start-up funding can seem hard to come by, and indeed the funding landscape is not as favourable as it was a few years ago. However, this doesn’t mean that money isn’t available. Great ideas still get funded, but you need to think carefully about the kind of investment you’re going to take, and the terms on which you’ll take it.

Keep reading to discover some of the different business funding options available for small businesses like yours.

How to get funding for a business – 5 tips to stand out

There are many different ways you can get funding for your business (which we’ll go on to discuss in this article) but how you achieve this funding is often the same. Whether your aim is to impress investors, convince a bank for a loan, or secure a business grant, here’s some tips to follow.

1. Develop your business plan

If you’re looking for funding to grow your business, you’ll need to show that your business is not only successful, but knows where it wants to go next. A good business plan is realistic yet optimistic – showing you’re prepared for any potential obstacles that may come your way.

If you need funding to tackle a particular problem, you’ll need to highlight this and clearly demonstrate the steps you’ll take to overcome this with your potential funding. Investors and banks will look at your business plan to make sure the funding they provide will help you – and offer a return on their investment.

Take a look at our full guide on how to write a business plan if you need some inspiration.

2. Understand your market

You might be an expert in your industry or trade, but to impress potential business funders you need to show a strong understanding of the business world. This could include demonstrating you’ve done sufficient market research into your industry – such as predicting upcoming trends or gaps in the market.

It’s also important to know what your competitors are doing. You can impress lenders with competitor research when you’re applying for different funding opportunities. We have a guide on competitor analysis to help you get started.

3. Market your business

Never underestimate the value of good marketing. Any potential lenders will want to see that you’re putting yourself out there and building a strong brand. Social media marketing is a great (and free) way to advertise your small business.

Why not try increasing your followers on Instagram to show there’s a genuine interest in your work?

You can also upskill in SEO to help increase your online visibility and reach more customers.

Whatever you choose to do, make sure it’s all clearly displayed in your marketing strategy.

4. Ask the experts

If you’re just starting out and looking for funding opportunities, is there a way for you to ask the advice of someone successful in your industry? Or someone who has a strong understanding of the business world in general? Getting their expert tips before you go into a pitching meeting to get funding could help you stand out from the crowd.

Check out our guide on the ways a business mentor can help your business.

And if you don’t have a personal business mentor of your own, why not check out these expert business tips from successful businesswoman Baroness Karren Brady CBE.

5. Perfect your business pitch

Whether you’re meeting with potential investors, entering a competition, or applying for a loan, a strong pitch is essential for your success.

We have a whole guide on how to write an elevator pitch – but it all comes down to being prepared, confident, and understanding your audience (not your customers, but the specific people you’re pitching to).

To help simplify your messaging and make the most of your time, we recommend preparing a strong mission statement and vision statement – this will show why you do what you do and the goals you want to achieve with your funding.

Funding for small business – what can I get?

Now that you’ve done the groundwork, it’s time to think about the type of funding you want for your business. Here’s a quick overview of the funding for small businesses you can get.

Business loans

A business loan is a cash injection to your business that you’ll have to pay back. It can come from a bank or through government funding. There are a whole range of different types of business loans – from loans specifically for startups and new businesses to ones for more established businesses.

When you take out a business loan to get funding for your business, you’ll pay it back with interest. Your interest rate will depend on a variety of factors and will be higher if your lender considers your business more of a risk.

Bear in mind that interest rates are particularly high at the moment, making it an expensive time to borrow money.

If you’re confident in your ability to pay back a loan, we’ve listed seven of the best business loans in the UK for you to choose from.

Small business grants

Unlike a loan, you won’t need to pay back a business grant. Because of this, the eligibility criteria for business grants tend to be more specific than those for business loans. But if you can identify what makes your business different, it can be a highly valuable opportunity for businesses in need of a cash boost.

Business grants are often industry specific or support businesses focused on important causes such as diversity, sustainability, or innovation – so it’s important to apply for a grant that aligns with your values as a business.

Check out our guide to small business grants if you’re looking for some inspiration of where (and how) to apply.

Business investors

Investments are when people see the potential of your business and provide you with additional funding – usually in return for a share in your business. This means that they’ll continue to see a return on their investment if your business does well.

Investors can come from a variety of places – including venture capital firms and angel investors.

If you’re interested in gaining this type of business funding, we have a guide on finding investors for your business.

Business line of credit

A business line of credit is a more flexible type of loan and works similarly to a credit card. You can borrow money up to an agreed amount and withdraw parts of the total amount as and when you need it. You’ll only pay interest on the amount you withdraw, rather than the total amount in your line of credit.

Your line of credit can be secured or unsecured:

a secured line of credit will provide you with a larger amount of funding but you’ll have to provide collateral in return (collateral is an asset used for security when borrowing money – you’ll lose your collateral if you fail to repay)
an unsecured line of credit doesn’t require collateral but will offer less funding – and potentially higher interest rates

Business line of credit vs business bank loan

What makes a business line of credit different from a bank loan is it’s typically used for smaller amounts of money. With a loan, you’ll receive a larger amount of money but have to pay it back over regularly scheduled payments.

A business line of credit will typically give you a smaller amount of money, but you only withdraw funds from it – and pay interest – when you use it, giving you much more flexibility.

Peer to peer lending

Though not as traditional as some of the other business funding options we’ve discussed, peer to peer lending is another way you can secure additional funds for your business.

Most similar to a loan, peer to peer lending uses online marketplaces to match you with potential investors. If an investor likes your profile, they can choose to invest in your business. You then pay interest on these investments which goes back to the loaner.

Check out our guide on peer to peer lending to learn more.

Crowdfunding

Another business funding opportunity in the digital age is crowdfunding. Instead of targeting just one potential investor or lender, crowdfunding lets you request smaller amounts of money from multiple people.

Sometimes these are donations and sometimes your investors will gain a stake in your business. To learn more about the different types of crowdfunding available to your small business, read our guide.

How to get funding for a new business

If you’re a startup or new business venture, you can still access most of the business funding opportunities we’ve discussed already. However, if you don’t yet have a proven track record of your business performance, you may have to work just an extra bit harder to convince investors that your business will be a success.

However, sometimes being a new business can work to your advantage. Many loans and grants are only available to new businesses, so you’ll be able to apply for them when a more established business can’t. Make sure to keep a look out for these opportunities so you don’t miss out.

Small business funding – how it can help

Business funding can make a real difference to small businesses looking to grow their reach. Each year, Simply Business awards a £25,000 business grant to a deserving small business. The winner in 2022 was sustainable fashion brand, Y.O.U underwear.

Small business owners are invited to fill out a short application, sharing information about their business and what they’d use the money for. A winner is then chosen by a panel of business experts.

To get an insight into the judging process, check out this video to see how our panel chose the winner – it may help you know what to focus on when applying for your own small business funding.

Have you used business funding to grow your business? Let us know what you used it for in the comments below.

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