How to get funding for startup businesses

Why you need a business plan for funding a startup

Before you go looking for startup funding, it’s a good idea to set out a business plan.

By detailing your business goals you’ll get a clearer idea of what startup funding you’ll need and when. Our free business planning template can get you going.

Having a clear plan in place makes it easier to get funding for a startup. See early on if things aren’t going according to plan.

Whoever is lending you money will be able to see how you intend to grow your business. And, importantly, whether you’ll be able to repay anything you borrow.

Make sure you can justify funding a startup

You’ve got to be able to justify your business case for funding a startup.

Convince the lender that your business is going to succeed. And back up your case with facts and figures.

That can give you time to steady the ship and get back on course.

How much funding do you need?

You should be able to answer that question once you’ve prepared a business plan. Make sure you run through all your potential startup costs.

• Registration
• Advertising
• Stock/materials
• Tools and machinery
• Insurance
• Bookkeeping
• Staff or subcontractors (if needed)

Think about how long it might take for income to start coming in. Funding a startup will need to cover that initial period when money is going out and perhaps not yet coming in.

Here, good cash flow management is going to be vital. Being able to show a lender your cash flow projections for the months ahead will also prove useful.

How long do you need funding for?

You can work this out once you have a clear idea of your cash flow requirements. It’s also a good idea to have some money in reserve for unexpected costs.

What are the main startup funding costs?

Now, let’s take a look at the main startup costs for trade business. These are all the things you’ll need to run the business.

A lot of startup costs have to be paid upfront – even before you’ve earned any income.

Startup funding charges

If you’re borrowing money for your startup, then it’s likely to come with charges and interest. This could potentially be a significant cost in the long term.

Deciding on how much startup funding you need is a balance between how much you borrow and how much it costs to borrow.

Van or other vehicles

Startup costs will depend on whether you decide to buy, lease or hire these assets.

Plant, machinery and equipment

Depending on your trade, the upfront costs of all the tools and equipment you need will vary. Take some time to find the best deals on tools for trade. This will reduce your startup funding costs.

Premises

This could be a high cost if you need an office, warehouse and workshop. Our guide to finding business premises will point you in the right direction.

Alternatively, when starting out, you might be ok basing your business at home, but you’ll still need a registered address, which will also incur costs.

Materials or stock

You can’t get started without all the items you need to do your job. Your business plan should outline how much work you expect to bring in over a set period.

Against this, you need to work out the cost of the stock or materials needed to complete the work.

Promoting your business

You’ll want to make a flying start with new customers. Your startup funding should cover the cost of marketing and advertising.

• For example, this could be online and in print
• You’ll probably need a business website before you launch your business
• Then there are things like business stationery and business cards to consider

As an added incentive, to help you reach new customers, Checkatrade will help you get more enquiries and is a great way to keep down costs associated with marketing.

Employee costs

If your trade business needs staff this will be another cost that you might want covered by your startup funding. Here are some top tips on hiring the best people for your business.

Insurance costs

A trade business will need a range of insurance to protect you, your customers and your staff. We can help you find the right insurance for your trade business.

Bookkeeping costs

Financial control is an essential requirement for any business. It’s even more important when you first start out.

Finding a bookkeeper or accountant will give you useful professional support to get your business going.

A good accountant should be able to advise you on growing your business within your financial means.

What are the types of startup funding?

You’ve got a business plan sorted. You’ve looked at the costs of running your trade business. Where to get startup funding depends on you. Here are some of the options:

Your money

If you have your own money available, you could use this to start and grow your business.

Family money

Family and friends might be willing to support your business venture.

Business loan

Funding a startup business on a short-term basis with a bank overdraft.

You can also use credit or debit cards. You’ll have to keep on top of these so you don’t go heavily overdrawn. Remember, bank charges can be pretty steep on this type of short-term funding.

Bank loans – typically three to five years – are another way to get started.

If you’ve got a business plan and cash flow prepared, then applying for a bank loan should be a lot easier.

Government startup loans and grants

The government offers lots of support for small business growth.

The government Start Up Loan offers from £500 to £25,000 to start or grow your business.

Other places to look for government grants include the British Business Bank. It has details of hundreds of grants available to small business.

Partnership finance

As well as putting in your own money, you could bring in business partners.

A business partnership typically has co-owners who share the profits.

Your business partners might be involved in the day-to-day running of the business or they might just provide you with startup funding in return for a share in the profits.

Investment by shareholders

Another type of business structure is to set up a limited company.

With this structure, investors can buy shares in the company and this can provide the startup funding it needs.

You can set up a small limited company, and it can be a good way to begin. Our guide to setting up a limited company has plenty of helpful tips to get you started.

Other types of startup funding

Nowadays, many startup businesses can also look to crowdfunding for financial support.

These are online platforms where people provide financial support. Examples include GoFundMe and Kickstarter. There are lots of different types of crowdfunding open to small business.

What are the startup funding stages?

Get organised with your startup funding with these steps:

• Write a business plan showing what funding you need and why
• Make sure you can justify your business plan so people feel confident lending to you
• Choose the best startup funding option for your trade business
• Keep a close eye on your business finances to make sure you have enough funding to keep you going
• Think about getting further funding so your business can continue to grow

FAQs

How does a startup get funding?

Where to get funding depends on who you want to borrow from. Types of startup funding include money from you or your family, from banks, government loans and from business partners.

How does startup funding work?

Knowing how to get funding for a startup begins with a simple ‘how much you need’ and ‘when’. To work this out, write a business plan that covers your expected cash flow and startup costs.

How much funding does a startup need?

This depends on your business and how quickly you think you’ll need startup funding. Many tradespeople start small and grow. That way, the funding doesn’t have to be large, so you’re more likely to obtain what you need.

How easy is it to get startup funding?

This also depends on how good is your business plan and the prospects for your startup business. If you’re borrowing money you’ll need to convince lenders that it’s worth providing you with the funding required for your new startup.

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