Start-up business funding

A new business is funded from the founder’s own money, a government Start Up Loan, asset finance on vehicles and equipment, grants for specific projects and, for a company built to scale, equity from angel investors. Mainstream lenders judge affordability on filed accounts, so the choice of lenders widens once you have a trading record.

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Why lenders want a trading history

A lender decides whether your business can afford its repayments by reading what it has already done: filed accounts, bank statements, the pattern of money in and out. A new business has none of that. A business plan is a forecast, and a lender cannot check a forecast against anything except the founder’s own record and credit file.

So a lender facing a start-up leans on what it can check. It looks at your personal credit history, at how much of your own money you have put in, at your experience in the trade, and at whether you will guarantee the debt. It will lend more readily against an asset it can repossess, such as a van, than against a plan. Once the business has filed accounts and built up bank statements that show steady income, the choice of lenders widens and the price comes down.

Until then, the routes that work are the ones designed for businesses without a history. The government’s Start Up Loans scheme lends to businesses that are new or have traded for up to 60 months. Asset finance is secured on what it buys. Equity investors back the founders and the idea, and take a share of the company in return.

Start-up funding options compared

Your own moneyStart Up LoanAngel investmentAsset finance
What it costsNothing in interest; the money is at riskFixed 7.5% a year at November 2026, no feesA share of the companyInterest set by the lender
How muchWhat you can afford to lose£500 to £25,000 per founderAgreed with each investorLinked to the price of the asset
Who is liableYouYou personallyThe investor bears the loss if the company failsThe business, often with a guarantee
Who it suitsEvery founder, as the first stakeSole traders, partners and directors in the first 60 monthsLimited companies with a plan to scaleAny business buying vehicles or equipment
Shops along a cobbled street in Norwich

Your own money

Every lender and investor will ask what you have put in. Your own stake shows you believe in the plan and carry some of the risk, and it reduces how much you have to borrow. It can come from savings, from the sale of an asset, or from family. If family lend, write the terms down, including when and how the money is repaid.

In a limited company, decide how the money goes in. Shares give you ownership and cannot be withdrawn at will. A director’s loan can be repaid to you as the company earns, with no tax on the repayment itself. Lending your own money to your company covers the choice. A director who already has a small self-administered pension scheme can, within strict rules, have it lend to the company: see whether a small self-administered scheme can lend to your company.

Keep enough back to live on. A personal survival budget, which the Start Up Loans scheme asks for, shows what your household needs each month while the business finds its feet.

Angel investors and seed investment

An angel investor puts personal money into a young company in exchange for shares. There are no repayments. The investor makes money only if the company grows and the shares become worth more, through a sale, a later funding round or dividends. That suits a company that needs more than it can borrow and expects to grow well beyond its starting size. It does not suit a business planning steady, modest profits, because there is no route for the investor to get the money back.

Investors in a qualifying early-stage company can claim income tax relief under the Seed Enterprise Investment Scheme, which makes the investment more attractive to them. Companies apply to HM Revenue & Customs for advance assurance before they raise, so investors know the relief should be available. Only a limited company can issue shares, so a sole trader or partnership has to incorporate first.

Every share you sell reduces your ownership and your share of any future sale. How much equity to give away and the equity dilution calculator show the effect before you agree a valuation. Getting investor ready covers the pitch, the numbers and the paperwork.

Grants for new businesses

Grants do not have to be repaid, but they pay for a defined project. They are not general start-up money. They are competitive, they open and close in rounds, and many ask you to match part of the cost from your own funds. A grant body will want to see what the project delivers: new jobs, research, energy savings, exports or growth in a particular area.

Innovation funding through Innovate UK is open to young companies with a technical idea. Local and devolved schemes vary by nation: see grants in England, Scotland, Wales and Northern Ireland. How business grants work explains the application and the claims process.

A first-year budget for a trade business

Illustrative example

A plumber sets up a limited company and needs £46,000 for the first year. The van goes on hire purchase over five years at an assumed 10% a year with an assumed nil deposit. A Start Up Loan of £12,000 runs over five years at the fixed 7.5%.

Tools and equipment
£6,000
Van
£24,000
Starting stock
£4,000
Insurance, website and registration
£3,000
Three months of running costs held in cash
£9,000
Funded by: founder’s savings
£10,000
Funded by: Start Up Loan
£12,000
Funded by: hire purchase on the van
£24,000
Start Up Loan monthly repayment
£240.46
Hire purchase monthly repayment
£509.92
Monthly finance cost to cover from trading
£750.38

The £46,000 of costs is met in full by the three sources. The cash flow forecast has to show £750.38 a month coming out of trading income from the first month.

Other routes in the first years

Asset finance
Vehicle finance and equipment leasing are secured on the asset, so a lender can say yes with less history.
Overdraft and credit card
Small, flexible limits for short gaps, from your business bank. Costly if left drawn for long. See business overdrafts.
Invoice finance
Once you invoice business customers, a lender can advance against the unpaid invoices. See invoice finance.
Crowdfunding
Raising money from a large number of backers through an online platform, in return for rewards, interest or shares. See crowdfunding.

Business loan calculator

The monthly repayment on a business loan, the interest over the term and the total you repay with the arrangement fee.

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Questions people ask

How do I get funding to start a business with no money?

Start with a Start Up Loan: it needs no assets, though you must pass a credit check and show the repayments are affordable from your household budget. Asset finance can fund vehicles and equipment against the asset itself. Grants fund specific projects and some need match funding. Equity investors back companies with a plan to grow. Lenders and investors will still ask what you are putting in, even if it is time and a small sum.

Can a limited company get a Start Up Loan?

The loan is made to you personally, as a director or founder, and you put the money into the company as a director’s loan or as share capital. Each founder can borrow up to £25,000, and one business can receive up to £100,000 across its founders. You remain personally liable for the loan even if the company fails.

How long does a business need to trade before it can get a bank loan?

Each lender sets its own minimum, and many want at least one set of filed accounts before they will lend unsecured. Asset finance and Start Up Loans are open earlier, because one is secured on the asset and the other is designed for businesses that are new or have traded for up to 60 months. See whether a new business can get a loan.

Are there government grants to start a business?

There are grants for specific projects, such as innovation, energy efficiency, hiring and exporting, and some local schemes support new businesses in particular areas. They are competitive and run in rounds. A grant for the general costs of starting up is uncommon. The government’s main start-up product is the Start Up Loan, a loan with mentoring attached. See business grants.

Should I use savings or borrow to start my business?

Use some of each. Your own stake reduces what you must borrow and shows lenders you share the risk. Borrowing keeps cash in reserve for the months before income settles. Keep enough savings aside to cover your household costs while the business grows, because a Start Up Loan and any personal guarantee are debts you owe whatever happens to the business.

Finance is subject to status and to the lender’s terms. A personal guarantee makes you liable for the company’s debt if it does not repay, and it can be enforced against your own assets, including your home. Nothing here is a personal recommendation.

Business loans

Start Up Loans

The government-backed personal loan of up to £25,000 for new and young businesses, with up to 12 months of mentoring.

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Angel investment

Business angels invest their own money in early-stage companies, alone or in syndicates.

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Seed Enterprise Investment Scheme

A young company can raise up to £250,000 from investors who get 50% income tax relief.

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Business loans

Term loans, secured and unsecured lending, government-backed schemes and how to compare offers.

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All business funding

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Funding searches run on Swoop’s platform. Swoop Finance Limited is a credit broker and not a lender, and is authorised and regulated by the Financial Conduct Authority (FRN 936513). Buzz Accounting Ltd introduces businesses to Swoop and may receive a fee from Swoop when funding is arranged. Business funding is separate from the financial advice Equity & General Financial Services Limited gives through this website. Finance is subject to status, and a lender may ask a director for a personal guarantee.

Cover for a personal guarantee

If a lender asks you to guarantee the company’s borrowing, our advisers can advise on life cover for that debt.

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