smallbusiness.co.uk: Helping your business think big

Although winning the lottery to get funding for your start-up might seem like an easier option than getting a bank loan – there are still other forms of finance out there.

Loans

One alternative is to join a credit union. These bodies lend relatively small sums to individuals rather than businesses, so limited companies cannot currently apply. Usually you will have to save with them for at least three months. The Association of British Credit Unions (ABCUL) says that unions are seeing an increase in lending due to banks being more cautious. If you live in an area served by one of these credit unions, you might be able to avail yourself of their facilities.

Ask around

Friends and family are a good place to start when looking for funding. There may even be someone with experience of running a business prepared to lend you the money and offer their help. However, you will need to draw up a written agreement specifying when the loan will be repaid and any interest payable.

Government grants

These will vary from region to region and what’s available will depend on which sector you are in. You can get advice on raising finance and find out what loans are available by contacting your local Business Link office.

Using plastic

Many early start-ups use their credit card to fund expenses – for items such as travel, stationery, and petrol. This can be a good way to fund the early stages of a business – although interest charges can be relatively high.

Charities

If you are between 18 and 30 and unemployed, the Prince’s Trust offers loans of up to £4,000 for a sole trader as well as grants of up to £1,500 for people wanting to set up a business. For people over 50, an organisation called Prime can also provide help with starting up.

Angels

These investors provide risk capital, so-called because – unlike debt finance – they have no security and are last in line for repayment if the company becomes insolvent. In exchange, they will take a stake in the company of between typically ten to 30 per cent. The majority of angel investments will be under £100,000. For more information visit the British Business Angels Association website.

Dragons

If you’re not scared of a spot of public humiliation, then why not try fiery cohort of Duncan Bannatyne, James Caan, Deborah Meaden and Peter Jones on Dragons’ Den. Not only will get your hands on some much needed capital, but you’ll get brilliant free advertising for your product – if successful, that is.

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