Running and growing a business is an exciting journey, but it often requires significant financial investment to take the next step, whether that’s expanding your team, entering new markets or developing new products. Securing funding can unlock opportunities and help you scale in a sustainable manner. But with so many options available, choosing the right source of funding can feel overwhelming.

In the UK, there are a variety of funding routes, from traditional bank loans to alternative lenders, government grants and private investors. Each option has its own advantages and challenges. Let’s go over some options so you can make the right decision for you.

Bank loans

For many businesses, bank loans remain a familiar and effective route to securing funding. They offer stability, clear repayment terms and often competitive interest rates. There are different types of loan on offer, too, depending on your needs, including term loans, overdrafts and business credit lines.

A traditional business loan provides a lump sum upfront, which you repay over time with interest. This type of funding is well suited to businesses with steady cashflow and a clear repayment plan.

However, securing a loan can be a challenge, as banks will require a strong credit history, financial records and perhaps even collateral, such as property or assets. You therefore need to be careful when securing funding through a bank loan, and always discuss the option with an accountant or financial adviser.

Government grants

Another funding option is government grants, which, unlike bank loans, do not need to be repaid. Nor do you have to give away a share of your business in exchange.

Grants can be worth up to hundreds of thousands of pounds but they typically offer only a few thousands pounds. But that hardly makes them a waste of time – it’s just likely you’ll have to supplement your grant with another form of finance.

The way that grants are paid out depends on the specific grant you’re applying for. You might receive it as a single lump sum or could be reimbursed after spending your own money.

However, grants are often granted for specific purposes, such as to support innovation, research, job creation and training. There are also often specific eligibility criteria, such as the size of your business, where you’re based and the sector you’re in.

To find a business grant, the best place to begin is online, especially the government’s business finance finder and your local growth hub.

Third-party investors

For businesses with ambitious growth plans, third-party investment can be an especially powerful strategy, as it can provide expertise, strategic advice and valuable industry connections as well as funding. Two common types of third-party investors in the UK are angel investors and venture capital firms.

Venture capitalists (VCs) are individuals or firms who invest money into companies in exchange for a stake in the business and the hope of a healthy return on investment. In the UK, VCs are most interested in sectors like life sciences, IT and Fintech. These businesses are usually in the early stages, so VCs are there to help you grow.

Angel investors are similar – they provide startup companies with initial funding, usually in exchange for ownership equity in the business. Sometimes, they will be involved in multiple startups at once.

The main difference between VCs and angel investors is the amount of money involved, with VCs typically having more to invest. You can, therefore, expect them to conduct more thorough due diligence than angel investors, who are usually more accepting of risk and like to work in a network of other investors.

So, a VC might make sense for you when you’re looking for significant investment or to partner with professionals who have worked with entrepreneurs like you in the past. An angel investor may be the better option for businesses that are still building a business case or want to retain more control over their operation.

Crowdfunding

In recent years, crowdfunding has become a popular alternative to traditional funding routes, especially for businesses with innovative products or strong customer engagement.

Through platforms like Crowdcube, Seedrs and Kickstarter, businesses can use crowdfunding to raise funds directly from the public, either in exchange for equity (equity crowdfunding) or through pre-orders and rewards (reward-based crowdfunding).

This approach can be advantageous, as it not only provides capital but also allows businesses to validate demand for their products and build a loyal customer base. However, success often depends on a compelling campaign and strong marketing efforts.

Closing thoughts on securing funding

Whatever stage your business is at, securing the right funding can make all the difference in achieving your goals. Whether it’s a traditional loan, a government grant, private investment, or crowdfunding, each option has its own benefits and considerations. The key is to find a funding route that aligns with your business strategy and growth plans.

We’ve gone over some of the options available to you for securing funding. If you need help going down one of these avenues or just want to learn more about investment strategies, don’t hesitate to get in touch. Let’s see how we can help.