Looking for business funding? It can be hard to know where to start! But with a bit of research, and sometimes a little luck, you can bag the financial support your business needs.
There are lots of different types of funding out there. From traditional bank loans and government grants to innovative crowdfunding platforms and private investors, it can all get a bit confusing.
This isn’t our first rodeo, so we’ll go over what options might be available to you (and our specialist subject – how to record everything in your accounts).
What types of business funding am I eligible for?
If you’ve already been looking, you’ll know there are many different funding options out there for businesses – many of which are tailored to different needs and stages of growth.
Bank loans
A popular go-to choice is a bank loan, where businesses borrow a set amount of money and repay it over time with interest. Business loans from the bank can be secured or unsecured:
- Secured: Assets such as equipment or property are offered as ‘security’, so if the borrower defaults on the agreement by missing repayments, the lender can seize the assets instead
- Unsecured: The lender and borrower enter into a contract based on the borrower’s credit history and financial health, but the loan isn’t secured against assets
You could also look into different types of loans, such as the Start-Up Loans scheme.
Equity funding
Another popular type of business funding is equity funding. This is where investors put in capital (which is usually cash, but it can include a broad range of financial resources such as assets) in exchange for a share of ownership in the business.
This can be attractive because owning shares in a business often means you receive a cut of its profits (known as dividend payments) or you can sell your shares for more than you paid once the company increases in value.
It’s particularly common amongst startups and businesses which are growing or seem likely to do so, where investors have the potential for high returns on what they put in. This can sometimes involve a fairly hefty investment to get to the next level.
Equity funding can come from sources like venture capitalists, angel investors or even crowdfunding platforms. While this type of funding doesn’t require repayment like a loan, it does mean giving up a portion of your business and sharing control with your investors. This has pros and cons of its own, but a big plus is that your investors can bring valuable experience and business contacts to the table.
Crowdfunding
Crowdfunding allows businesses to raise funds from a large number of people, usually through online platforms, in exchange for rewards, equity, or simply the satisfaction of supporting a fabulous idea.
Peer-to-peer lending
Peer-to-peer lending matches businesses directly with individual lenders willing to loan money, often at slightly lower interest rates. These alternative funding methods offer flexibility and the ability to engage with a community of supporters or investors who are excited about your business.
Business grants
Grants and growth schemes are another way you might consider funding your business. Grants don’t normally need to be repaid. This can mean the application process is competitive and time-consuming, but grants are often a great opportunity to finance projects without worrying about getting into debt.
The UK government offers various grants, such as Innovate UK grants, but they can also be awarded by other funding bodies or even companies.
What’s the best way to keep track of different income streams?
Monitoring different income streams is all about staying organised and using the right tools. Keeping track of your financial records is incredibly useful (and a legal requirement for businesses and self-employed people so they can report their income correctly).
In terms of recording any funding or financing, it’s often useful to categorise where the income comes from and where it goes.
For example, in Pandle (yes, that’s us, but other providers are also available) you can create a ‘Project’, and then tag it in any transactions coming in and going out of your business. That way you can report on how the funding was used, as well as monitor any repayments.
What counts as taxable income when it comes to business funding?
Taxable income (literally any income you or your business needs to pay tax on) can come from different sources, such as sales, selling assets, investment, or other business activities. In a nutshell, anything that brings money into the business, including loans and grants, is generally considered taxable.
Some grants might be exempt from this rule, so double-check everything and make sure your records are meticulous!
How do I apply for business funding?
Applying for business funding involves a few key steps, starting with working out the type of funding that suits your business best. After that, the process can vary depending on which route you’re going down.
You’ll often need to include a business plan and financial projections to show your business’s potential and how you plan to use the funds. For bank loans, you’d typically apply directly through the bank, while for grants you’ll need to find out what’s available and follow their specific application processes.
If you want to attract investors, be ready to showcase why they should back your venture. It’s always a good idea to get professional business advice and support to guide you through the process and boost your chances of success too.
Find out more about managing your business expenses with Pandle! Create your account today.
