How to get funding to start a business

Over 800,000 new businesses were started in the UK in 2025. And based on historical trends, it’s likely that nearly half used external finance to get started.

Getting funding for your business can help with cash flow, hiring talent and expanding your operations. But there are some potential downsides to consider.

In this article, we’ll explain why you might consider getting business funding, what options are available, and whether you should consider raising funds for your business.

Key points:

• Finding money to start a business can unlock growth opportunities and give you the resources to turn your vision into reality

• But be weary of potential downsides, including high interest rates, loss of equity, or strict repayment terms

• Funding Options by Tide can help you secure the right funding for your start up quickly and easily, so can focus on growing your business

Why consider getting funding to start a business?

Starting a business is exciting, but ideas alone won’t turn plans into reality. That’s where funding steps in – it’s the fuel that helps you bridge the gap between a brilliant concept and a thriving business.

Most businesses need money to get started or grow. Buying equipment, hiring staff, or launching a marketing campaign all costs money, and most people don’t have that cash to hand.

Today, there are more ways than ever to get that support. And banks aren’t your only option anymore – crowdfunding, grants, investors, and alternative lenders all offer different ways to securing the capital you need.

In addition to money, some types of funding can also bring expertise, connections, and credibility to your business. The right backer might offer advice, open doors for you, or simply give your venture the vote of confidence it needs to attract customers and partners.

Are there downsides to raising funds for a business?

Funding can give your business a much-needed boost, but it’s not without its trade-offs.

You’ve probably heard the phrase, “Nothing comes for free.” Well, lenders and investors will also expect something in return, whether that’s interest payments, equity, or even a say in how you run things.

Securing funding isn’t always quick or easy, either – you’ll have to jump through a few hoops to get it, which can involve detailed applications and potentially pitching your plans to strangers.

Raising funds too soon can also create pressure, potentially tying you to long-term repayment schedules or investor expectations that might not align with your vision. Sometimes, the cost of funding, both financially and in terms of control, can outweigh the benefits.

So, while getting funding can help boost growth, it’s important to ask yourself whether it’s the right move for your business right now.

How to get funding to start a business

Angel investment

Angel investors are people with deep pockets who choose to back promising start ups in exchange for a slice of the business. They’re often experienced entrepreneurs themselves, so they can also offer mentorship, industry connections, and valuable advice. And because they’re investing their own cash, they’re usually more flexible and willing to take a risk on early-stage ideas that banks might turn down.

If this sounds like the right fit for you, a good place to start is the UK Business Angel Association (UKBAA), which connects start ups with potential angels. But remember, angels will want to see potential for growth and a solid plan, so be ready to pitch your vision clearly and convincingly.

Asset finance

Asset finance lets you get the equipment, vehicles, or tech your business needs, without paying the full cost upfront. Instead, you spread the payments over time or lease the assets outright, which keeps your cash flow healthy. And because the loan’s secured against the asset itself, it can be easier to qualify for than other types of funding.

Business loans

Business loans are one of the most traditional ways to fund a new business, and for good reason. They offer a straightforward lump sum that you pay back over time, usually with interest. And because banks and specialist lenders are often used to working with businesses of all sizes, they can provide structured repayment plans that fit your cash flow. But securing a loan isn’t always easy – you’ll need a solid business plan, a good credit history, and often some form of collateral.

Credit cards

Using a business credit card might not be the first funding option that springs to mind, but it can be a quick and flexible way to cover early costs. And because you only pay interest on what you borrow, it can be handy for managing cash flow or unexpected expenses. Many cards also come with perks like rewards, cashback, or interest-free periods, which can give your business some extra breathing room. But be careful – high interest rates and fees can add up if you don’t meet the minimum repayment requirements each month.

Crowdfunding

Crowdfunding lets you raise money by pitching your business idea to the public, usually through online platforms. As well as getting the funds you need, it’s a chance to validate your idea, build a community of supporters, and even generate early sales. But standing out in a crowded space isn’t always easy, so you’ll need a clear message and a smart marketing strategy to get noticed.

Equity finance

Equity finance involves selling a share of your business to investors in exchange for capital. It’s a popular route for start ups with big growth potential, as you don’t have to worry about repaying loans or interest. And because investors become part-owners, they’re often more invested in your success, offering guidance, contacts, and even hands-on support. But giving up equity also means giving up some control, so it’s important to find investors who share your vision and understand your long-term goals. There are important differences compared to taking on debt – read our debt vs equity finance guide to learn more.

Family and friends

Turning to family and friends for funding can be one of the simplest ways to get your business off the ground. And because they already know and trust you, they might offer more flexible terms than a bank or investor. But mixing money with personal relationships can get complicated if things don’t go to plan. So it’s important to treat it like any other business agreement – put everything in writing, set clear expectations, and be upfront about the risks.

Government grants

Government grants are essentially free money. You don’t have to pay them back or give up a stake in your business. And because they’re designed to support innovation, growth, and specific industries, they can be a real lifeline for start ups that qualify. But they’re not always easy to get. The application process can be competitive, and you’ll need to meet strict criteria, often tied to things like job creation, research, or sustainability. So it’s worth doing your homework to find the right scheme and make sure your application stands out.

Invoice finance

Waiting for customers to pay can put a serious strain on your cash flow, especially when you’ve got growth plans to fund. This is where invoice finance comes in. Instead of waiting weeks or months for outstanding invoices to be settled, you can sell them to a lender and get most of the cash upfront. The funding’s tied to money you’re already owed, so it grows with your sales, which can make it a viable option for businesses with long payment terms. The process is usually fast, and you won’t need to put up assets as security. But it’s worth shopping around for the best rates, as fees can vary.

Merchant cash advance

A merchant cash advance lets you borrow against your future card sales, giving you a lump sum upfront in exchange for a percentage of your daily or weekly revenue. And because repayments rise and fall with your sales, it can be a flexible option if your income fluctuates. But this convenience comes at a cost – fees can be higher than traditional loans, so it’s worth weighing up whether the speed and flexibility outweigh the expense.

Overdraft

An overdraft lets your business borrow money through your current account, up to an agreed limit, whenever you need it. It’s a flexible way to cover short-term gaps in cash flow or unexpected costs, and you only pay interest on what you actually use. But overdrafts aren’t a long-term solution, as they can be expensive if you use them regularly, and banks can withdraw or reduce the facility at any time.

Peer-to-peer lending

Peer-to-peer lending connects businesses directly with individual lenders through online platforms. These platforms operate digitally, so the process can often be faster and more flexible than traditional bank loans. You can borrow anything from a few thousand to much larger amounts, depending on your needs – and sometimes at competitive rates. But like any loan, you’ll need to repay it with interest, so make sure the terms work for your business before you commit. To learn more, read our guide to peer-to-peer lending.

Pension-led funding

Pension-led funding lets you use your existing pension pot to invest in your own business, without taking out a loan or giving away equity. Since you’re essentially borrowing from yourself, the terms can be more flexible than traditional funding. It can be a smart option if you’ve built up a pension and want to put it to work for your business, while also keeping control. But it’s not without risks, so it’s important to get expert advice and understand the implications before diving in. To learn more, read our pension-led funding case study.

Personal savings

Using your own savings is often the simplest way to fund your business. You’re not answering to investors or lenders, so you keep full control over how the money’s spent. It also shows commitment, which can make your business more attractive to future investors. But mixing personal and business finances can get messy. If you’re using your own money, it’s a good idea to move it into a dedicated business savings account. This keeps your finances organised and helps you track your business spending more effectively. Remember, only invest what you can afford to lose, and always keep some savings aside for emergencies.

Revolving credit facility

A revolving credit facility works a bit like a business overdraft, giving you access to a set pot of money that you can dip into whenever you need it. You only pay interest on what you actually use, which makes it a flexible way to manage ongoing expenses or unexpected costs. Once you repay what you’ve borrowed, the money becomes available again, so it can be good for businesses with fluctuating cash flow. But like any borrowing, it’s important to keep on top of repayments and understand the fees involved.

Start Up Loan

A Start Up Loan is a government-backed scheme designed to help new businesses get off the ground with affordable, fixed-rate financing. You can borrow between £500 and £25,000, and the loan comes with free support and guidance to help you build your business plan. And because it’s unsecured, you won’t need to put up assets as collateral. The repayment terms are straightforward, too, with a fixed interest rate of 6% (as of February 2026) and up to five years to pay it back. To apply, you’ll need a solid business idea and a clear plan for how you’ll use the funds.

Should you raise funding for your business?

Raising funding can help your business grow faster, jump on opportunities, and build momentum. And with so many funding options available, there’s likely a solution that fits your needs.

But funding always comes with strings attached. You’ll need to consider what you’re willing to give up in return, whether that’s equity, control, or the pressure of repayment. And securing funding isn’t always quick or easy, taking time, effort, and sometimes, compromise.

Before you raise funds for your business, consider whether this is the right move for your business right now, and whether the benefits are likely to outweigh the costs. If the answer’s yes, funding could be the push your business needs. If not, there are always other ways to grow. The most important thing is choosing a path that aligns with your vision and your long-term goals.

Compare your start up financing options with Funding Options by Tide

If you’re starting a business, you’ll want to make sure you’ve got the money to turn your plans into reality. With Funding Options by Tide, finding the right funding is straightforward – compare lenders, check your eligibility, and apply, all in one place.

With access to over 80 lenders and free expert support, we’ve already helped over 19,000 SMEs secure more than £1.1 billion in funding.

Compare your financing options with business loans from Funding Options by Tide.

FAQs

Is it hard to find money to start a business?

It can be challenging, but it’s not impossible. The key is knowing where to look – banks, investors, grants, and crowdfunding platforms all offer different routes, and the right fit will depend on your business model and preparation.

How quickly can you obtain money to start a business?

It really depends on the type of funding you choose. A bank loan or grant might take weeks or months, while a credit card or a personal loan could come through in just a few days if you’re prepared.

How can you finance a franchise start up?

Buying a franchise is often seen as a safer bet for lenders because the business model’s already proven, and franchisors usually offer support. Even if you’re putting in some of your own money, you’ll likely need extra funding for fees, stock, and operating costs, and there are plenty of lenders and loan options, like asset finance or leasing, tailored specifically for franchises.

Please note that the information above is not intended to be financial advice. You should seek independent financial advice before making any decisions about your financial future.

It’s important to remember that all loans and credit agreements come with risks. These risks include non-payment and late-payment of the agreed repayment plan, which could affect your business credit score and impact your ability to find future funding. Always read the terms and conditions of every loan or credit agreement before you proceed. Contact us for support if you ever face difficulties making your repayments.

Funding Options, now part of Tide, helps UK firms access business finance, working directly with businesses and their trusted advisors. Funding Options are a credit broker and do not provide loans directly. All finance and quotes are subject to status and income. Applicants must be aged 18 and over and terms and conditions apply. Guarantees and Indemnities may be required. Funding Options can introduce applicants to a number of providers based on the applicants' circumstances and creditworthiness. Funding Options will receive a commission or finder’s fee for effecting such finance introductions.