Raising funding for your small business is one of the first hurdles that you may face. In addition to bank loans there is a range of alternative sources of finance available.

There are a range of finance options when starting up a new business:

  • Borrowing from friends and family
  • Business finance from a bank
  • Business loan guarantees
  • Business grants
  • Government loan
  • Investment

A Guide to Business Finance is available from BritishBusinessBank.

Many businesses use a combination of these funding options to start up.

For an overview of the different type of finance options follow this link.

Saga have produced a range of guides to financing a new business:

Small businesses applying for bank loans are often “judged harshly” and being turned down before all the background has been considered. However, the independently monitored appeals process overturned nearly 40 per cent of decisions to reject applications for bank loans last year. 

A guide to appealling against a decision, with the appropriate banking forms is available at betterbusinessfinance.co.uk.

Enterprise Finance Guarantee

Government assistance may be available in the form of an Enterprise Finance Guarantee which help small businesses access loans.

Further information is available here.

UK Government’s Start-up Loan

Start-up Loans are a government funded scheme to provide advice, business loans and mentoring to startup businesses.

You can apply for a government-backed Start Up Loan of £500 to £25,000 to start or grow your business..

You will have a delivery partner (assigned by the Start Up Loans Company) who will help you develop a business plan. This will be assessed and funding decided by the Start Up Loans Company and if your plan is approved you will be given a low-cost unsecured loan, business mentoring and a range of business support products, if your plan is approved.

The interest rate is currently fixed at 6% nominal (approximately to 6.19%) and the loan is repayable over 1-5 years.

Full details can be found at GOV.UK.

CDFIs

If you’re looking for finance and have been turned down for a bank loan, Community Development Finance Institutions (CDFIs) might be an option.

CDFIs are small, independent organisations set up to support communities by providing affordable finance that would otherwise not be available. Many CDFIs are run with funding from the Government and charitable trusts, alongside other funding sources.

CDFIs lend money to businesses, social enterprises and individuals in deprived communities who struggle to get finance from ‘mainstream lenders',  such as banks, building societies and loan companies, by offering loans and support at an affordable rate.

CDFIs are seen as a reputable source of finance with some of the larger ones being regulated by the Financial Services Authority. All must comply with the sector's trade association, (CDFA), code of practice.

To find out more about CDFIs and to find the nearest one to your business go to the association website by following this link.

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