Ways to raise money for your business

Why funding matters when starting a business

Most businesses need some level of upfront investment to get off the ground. Even lean startups often require funds for:

• Equipment or tools
• Website development or software
• Marketing and branding
• Stock or materials
• Hiring freelancers or staff

Without enough funding, it can be difficult to gain momentum or even get started at all.

That said, more money isn’t always better. The key is understanding what you actually need, rather than raising more than necessary and taking on extra risk.

How much money do you need to get started?

Before exploring funding options, it’s important to get clear on your numbers.

A simple way to estimate your startup funding needs is:

Monthly costs × 6–12 months = ideal funding target

This gives you a “runway”—the amount of time your business can operate before it needs to generate consistent income.

Consider:

• Fixed costs (rent, subscriptions, salaries)
• Variable costs (marketing, materials, shipping)
• One-off setup costs (branding, legal, equipment)

If you’re starting small, you might only need a few hundred pounds. For more ambitious ventures, you could be looking at £10,000–£100,000+.

Overview of business funding options

There are several ways to fund your business, each with its own benefits and trade-offs.

• Loans – Borrow money and repay with interest
• Grants – Non-repayable funding (often competitive)
• Investors – Exchange equity for capital
• Crowdfunding – Raise money from the public
• Bootstrapping – Use your own funds
• Alternative finance – Flexible or hybrid options

Let’s explore each in more detail.

Business loans

Loans are one of the most common ways to fund a small business in the UK.

UK-specific options:

Start Up Loans (UK Government-backed scheme) – Offers loans up to £25,000 per founder, plus mentoring

High street banks (e.g. Barclays, NatWest, Lloyds)

Online lenders and fintech platforms

Pros:

You keep full ownership of your business

Predictable repayment structure

Cons:

You’ll need to repay the loan with interest

Approval may depend on credit history or business viability

Loans can be a good option if you have a clear plan for generating revenue and are comfortable managing repayments.

Grants: Funding you don’t have to repay

Grants are often seen as the “ideal” funding option—but they can be competitive and time-consuming to secure.

UK grant examples:

Innovate UK – Funding for innovative or tech-driven businesses

Local council grants (vary by region)

The Prince’s Trust (for young entrepreneurs)

National Lottery funding (for community-focused projects)

Pros:

No repayment required

Can boost credibility

Cons:

Strict eligibility criteria

Application process can be lengthy

Grants are particularly useful for early-stage businesses, social enterprises, or innovative ideas. Read more here about Startup loans.

Investors

If your business has strong growth potential, you might consider raising money from investors.

Types of investors:

Angel investors – Individuals investing their own money

Venture capital (VC) firms – Invest in high-growth startups

UK ecosystem highlights:

Angel networks such as UK Business Angels Association

SEIS (Seed Enterprise Investment Scheme) and EIS tax reliefs, which encourage investment in startups

Pros:

Access to larger amounts of funding

Strategic support and connections

Cons:

You give up a share of your business (equity)

Potential pressure to grow quickly

This route is best suited to businesses aiming to scale rapidly.

Crowdfunding

Crowdfunding has become increasingly popular, especially for product-based businesses.

Popular UK platforms:

Crowdcube (equity crowdfunding)

Seedrs (equity crowdfunding)

Kickstarter (reward-based)

Pros:

Raises both funding and awareness

Validates your idea in the market

Cons:

Requires strong marketing effort

Success isn’t guaranteed

Crowdfunding works well if you can tell a compelling story and build excitement around your product or idea.

Bootstrapping or funding it yourself

Many businesses start with little or no external funding.

Bootstrapping means using:

Personal savings

Income from another job

Early business revenue

Pros:

Full control and ownership

No debt or external pressure

Cons:

Slower growth

Personal financial risk

This is often the most accessible option for early-stage founders—and a great way to test an idea before seeking external funding.

Alternative funding options

Beyond the more traditional routes, there are several other ways to raise money for your business. These can be particularly useful in the early stages or alongside other funding methods, but they do come with considerations.

Friends and family

Borrowing from friends or family can be quick and flexible, often with more relaxed terms. However, it’s important to treat it professionally—agree terms in writing and be clear on repayment. Financial arrangements can affect relationships if things don’t go as planned.

Revenue-based financing

This allows you to repay funding as a percentage of your revenue, making it more flexible than fixed repayments. It can work well for businesses with steady income, but the overall cost can be higher—so it’s important to understand the terms fully.

Business credit cards

Useful for short-term expenses or managing cash flow, especially with interest-free periods. That said, interest rates can be high if balances aren’t cleared quickly, so they’re best used carefully and not as a long-term solution.

Partnerships or joint ventures

Partnering can bring funding, skills, or resources to help your business grow. However, it also means sharing control, so having clear agreements in place from the outset is essential to avoid misunderstandings later.

Choosing the right funding option

The best funding choice depends on your situation.

Think about:

How much you need

Your stage of business

Your risk tolerance

Whether you’re willing to give up equity

A simple guide:

£1,000–£10,000 → Bootstrapping, grants, small loans

£10,000–£100,000 → Loans, crowdfunding

£100,000+ → Investors, venture capital

There’s no one-size-fits-all answer—it’s about finding what works for you.

Risks and compromises to consider

Every funding option comes with trade-offs.

• Financial risk – Taking on debt or using personal savings
• Loss of control – Sharing ownership with investors
• Time commitment – Applications, pitching, reporting
• Pressure and stress – Meeting expectations and repayments

Being realistic about these factors can help you make more confident decisions.

Tips to improve your chances of getting funding

If you’re planning to raise money, preparation makes a big difference.

• Create a clear, realistic business plan
• Understand your numbers (costs, pricing, projections)
• Build a minimum viable product (MVP) if possible
• Practice your pitch
• Check your credit score (for loans)

Funders want to see that you’ve thought things through and are committed.

FAQs

Can I start a business with no money?

Yes, many businesses start with minimal investment by using free tools, skills, and time. This is known as bootstrapping.

What is the easiest way to get funding in the UK?

There’s no universal “easy” option but Start Up Loans and crowdfunding are often accessible for early-stage businesses.

Do I need a business plan to get funding?

In most cases, yes. Whether you’re applying for a loan, grant, or investment, a solid plan is essential.

How do investors make money?

Investors typically earn returns by selling their shares later at a higher value, often when the business grows or is sold.

Summary

Raising money for your business can feel like a big step, but it’s also an opportunity to build something sustainable and meaningful.

Start by understanding how much you need, explore your options, and choose the route that aligns with your goals and comfort level.

There’s no perfect path, only the one that works best for you and your business.

Protect what you’re building with the right business insurance

Protectivity offers affordable business insurance suitable for self-employed, sole traders, limited companies and entrepreneurs, specialising in a wide range of different activities.

Public liability is included with options to add extras such as equipment cover, employers’ liability and other specific industry add-ons.

Explore the full list of business insurance we provide today – or get in touch with our team to discuss your specific requirements.

*Disclaimer – This blog has been created as general information and should not be taken as advice. Make sure you have the correct level of insurance for your requirements and always review policy documentation. Information is factually accurate at the time of publishing but may have become out of date.