The document discusses various options for financing a new business, including estimating startup costs, personal savings, loans from family and friends, bank loans, crowdfunding, grants, invoice financing, and leasing. It also provides tips for reducing costs such as using communal office space, buying used furniture, negotiating purchases, outsourcing tasks, and taking advantage of free resources and grants.

1. FINANCING A BUSINESS

2. Estimating Startup Costs..................................................................................................................................3
Setting up Costs............................................................................................................................................3
Overheads / Fixed Costs ...............................................................................................................................3
Contingency .................................................................................................................................................3
Calculator.....................................................................................................................................................4
Financing your Startup.....................................................................................................................................5
Saving / Personal Borrowing.........................................................................................................................5
Family & Friends...........................................................................................................................................6
Outside investors..........................................................................................................................................6
Crowdfunding...............................................................................................................................................7
Bank loan .....................................................................................................................................................7
Grants..........................................................................................................................................................8
Overdraft .....................................................................................................................................................9
Invoice financing...........................................................................................................................................9
Invoice discounting.....................................................................................................................................10
Leasing.......................................................................................................................................................10
Reducing costs...............................................................................................................................................11
Office Space ...............................................................................................................................................11
Office Furniture..........................................................................................................................................11
International calls.......................................................................................................................................11
Negotiate everything..................................................................................................................................11
Banking......................................................................................................................................................11
Outsource ..................................................................................................................................................11
Free Apps, websites & hosting....................................................................................................................12
Apprenticeships & Internships....................................................................................................................12
Small accounts............................................................................................................................................12
Grants........................................................................................................................................................12

3. Now you have a good business idea and have determined your target market, it is time to look at the financing
of your company. This doesn’t only mean where you are going to get the money from, but also how much
funding you may need to get, in order to get your idea off the ground and your business running.
ESTIMATING STARTUP COSTS
Startup costs can easily be under-estimated. Having a good business plan can really help determine these costs
fairly accurately and help your startup succeed through its first years as you are less likely to face unforeseen
surprises or run out of cash early.
The most efficient way is to break them down in 3 categories: the setting up costs, the overheads and the
contingency fund.
SETTING UP COSTS
These are the costs that happen before your business starts trading. There are 3 types of costs a company will
usually have prior to launch:
 Professional fees. These can range from design work such as logo, website and brochures to legal
work.
 Equipment costs. This will include equipment such as desks, licences and insurances.
 Premises costs. If these are not a necessity for your business to launch, they are best avoided. They
can be one of the biggest cost, as they often include deposit, upfront rent, refit/redecoration, making
safe, secure & legally compliant.
OVERHEADS / FIXED COSTS
It is best to cover the entire first year of trading in your calculation. You should include all recurrent
costs such as mortgage repayments, bills, insurance, wages and associated taxes.
You should also account for your product costs. This can be raw material costs if you manufacture the products
or the cost of the stock you will need if you resell goods. You won’t need to worry about this category if you
are starting a service business.
CONTINGENCY
This area is often omitted by business owners, but it is always best to plan for the unexpected. It could be the
make or break of the business. Getting extra loans from the banks at this point can be extremely hard. Many
businesses run out of cash and are forced to close in the first year for this reason. Planning for the unplanned
could actually save your company!

4. CALCULATOR
In any case, you will have ti make sure you have enough cash in the bank to see you through the first 6
months. Planning for the first year is even better.
Use our startup calculator tool to work out your finances:

5. FINANCING YOUR STARTUP
Now you have estimated how much funds you will need to start, you know how much financing to ask for. The
next question to ask yourself is where to get it from & how to raise it.
There are many options available to startups nowadays, from the good old fashion bank loan to giving away
part of your business to investors. You could also consider a combination of several options.
SAVING / PERSONAL BORROWING
This is the easiest and most likely option for anyone starting a new business. You will have to plan
and spend very carefully as your own money is at stake. It should however give you greater rewards
should the business succeed. There are several ways to get personal finance:
 Mortgage / Remortgage
 Private loan
 Credit cards
You could even sell some personal possessions.
ADVANTAGES
 Quick and easy
 No need for pitching
 No interests to pay if personal savings
DISADVANTAGES
 Risk of losing your own money and be personally in debt. The limited liability of a limited
company will not protect this part of your assets if the company was to fold.

6. FAMILY & FRIENDS
There are two possible options in that case. They could simply lend you some money or buy shares
in your company. You will have to consider this option very carefully as it could put a real strain on
your relationship should your business struggle.
ADVANTAGES
 Quick & Easy
 Personal support. Those who have lent you money most likely believe in your ability to drive
the business forward and make it a success.
DISADVANTAGES
 Possible strain on the relationship
 Need to justify your business results to friends & family
OUTSIDE INVESTORS
Equity funding usually involves receiving money in exchange of part of your business (shares).
Investor(s) will take a share of the profit or loss of the business.
ADVANTAGES
 Knowledge & skills investor(s) can bring to the business.
 No interests to pay
 No loan to repay
DISADVANTAGES
 You will only own a share a your company
 You won’t be able to make all decisions without consulting investors
 This option is only available to Limited Companies (with shares to sell). Therefore,
unavailable to Sole Traders & Partnerships.

7. CROWDFUNDING
Very similar to the “outside investor” option, with the difference of having many small investors
involved. Crowdfunding is gaining in popularity through the emergence of crowdfunding websites.
The principle is easy, you create a project and pitch on one of the crowdfunding website in exchange
for some incentives/rewards. This can be a specific reward you decide to give away on sites such as
www.crowdfunder.co.uk, a straight forward business loan (e.g. www.fundingcircle.com), or
incentives through giving away shares in your business (e.g. www.crowdcube.com). If interested in
crowdfunding you will have to choose the option that best suits you and your business.
BANK LOAN
A straight forward bank loan is a fixed amount you borrow from a bank over a set period, with an agreed
repayment schedule.
Banks tend to need a lot of reassurance before they are ready to lend you money.
- The more money you already have invested in the business (via personal means, friends, family or
outside investors), the more likely is the bank to lend you extra money.
- A thorough, credible business plan will help the bank (and any investors) understand how your
business will make money, and therefore how the bank will recoup its money (& interest!).
- Your own track record. Any investor (including banks) invest in the person as well as the business.
It is therefore important to prove that your skills and experience will be a great asset for the running
of the business.
- Security. Banks will want you to provide some form of security, should the business fail. It may ask
for business assets or personal guarantee.
Bank loans tend to be a suitable option for startup capital or buying assets (equipment), but should be avoided
to finance the day to day running of the business. You may struggle to keep up repayments if used in that way.
ADVANTAGES
 You have the money for an agreed amount of time
 You retain 100% of your business
DISADVANTAGES
 No flexibility
 Risk of missing monthly repayments if customers don’t pay you
 Risk of loosing personal belongings if loan secured against your personal assets
 Risk of higher monthly repayments if variable interest rate increases

8. GRANTS
A grant can take three forms:
- Outright cash
- 0% interest loan
- Subsidised loan
There are very specific criteria to meet before being eligible for a grant. However, due to their
nature and attractiveness, there is fierce competition throughout the application process. You are
therefore very likely to spend a lot of time and effort applying and be unsuccessful.
You will of course need a credible and viable Business Plan if you want to stand a chance succeeding.
ADVANTAGES
Either no repayments or interests to pay on the loan.
You keep 100% stake in your business
DISADVANTAGES
Strict eligibility. Finding a suitable grant can be difficult
There is a lot of competition, hence low chance of succeeding
Grants are often awarded for a proposed project, not one that has already started.
Lengthy application process

9. There are a few more financing options such as overdrafts, invoice financing or leasing & assets finance, which
tend to be available to running businesses.
OVERDRAFT
This can be a short term way businesses have to fund a project, You would usually have agreed with your bank
a planned overdraft amount. This said, it is best not to use it consistently or your bank may get concerned
about the financial health of the business.
ADVANTAGES
 Flexible. You borrow what you need when you need it (within the planned overdraft limit).
 Easy. A short conversation with your account manager will usually suffice.
DISADVANTAGE
 Interest rates and overdraft fees may have to be paid.
 The bank can ask for the money back at any time.
 Only available with your current bank account.
INVOICE FINANCING
FACTORING
You sell your owned debts (from unpaid invoices) to an invoice financier, who collect them on your behalf.
They will usually pay you a percentage of the due amount and pay the reminder once the due amount has
been collected from your customers
ADVANTAGES
 Better cashflow
 Save time by not having to chase unpaid invoices
DISADVANTAGES
 Cost. You make less per invoice by paying a fee (often a percentage of the invoice)
 Eligibility. Tends to be only for B2B, rather than B2C
 Your customers will know you use factoring
 Your customers might prefer to deal with you directly
 Can tarnish your reputation if the invoice financier doesn’t deal well with your clients.

10. INVOICE DISCOUNTING
A lender lends you money against your unpaid invoices. You will still have to collect them.
ADVANTAGES
 Cash flow.
 Confidential. It can be arranged so your customers are not aware you are using it.
DISADVANTAGES
 Cost. Loss of part of your profit on each invoice.
 Eligibility. Tends to be only for B2B, rather than B2C
 Risk of low eligibility to get funding. Using invoice financing means you don’t have any “book debts”
available as security.
LEASING
This is a very good way for companies not to have to incur huge upfront costs. The assets (such as equipment)
are rented or leased, meaning the cost if only a monthly fraction compared to the cost of buying them
outright.
ADVANTAGES
 Latest equipment. Leasing usually gives you access to the latest available equipment on the market.
 Safe. If you can’t keep up with repayments, you will usually loose the asset. Not your personal
possessions.
 No unscheduled repair costs. Leasing companies are usually responsible for the repairs on the
equipment.
 Fixed cost. The monthly payments are usually fixed over a set period of time (unlike a variable rate on
a bank loan)
DISADVANTAGES
 Overall cost. It is usually more expensive than buying the asset outright.
 Long term contracts. You are likely to find yourself tied in some long term contract, which would
prove difficult to cancel.

11. REDUCING COSTS
It can be very challenging for startups to raise money, especially at the early stages of the business. The bigger
the amount, the harder it often is. So we have listed many areas a startup can save money and therefore reduce
the capital to be raised.
OFFICE SPACE
Rather than investing in “usual” office space, opt for communal space. It does not only cost considerably less, it
will also help you connect with like-minded individuals. These office spaces tend to offer a great culture & will
help you meet other entrepreneurs whose skills could complement your business.
OFFICE FURNITURE
If you choose to have a dedicated office space that needs to be furnished, always seek second hand office
furniture. There are many companies such as www.recycledbusinessfurniture.co.uk or www.lamoffice.com that
specialise in this area. Or simply go onwww.ebay.co.uk or www.gumtree.co.uk
INTERNATIONAL CALLS
There is no need for expensive phone bills, even when your business requires you to make international calls.
There are many alternatives to choose from, such as Skype, Google hangouts or VoIP. Just remember that your
correspondent can see you if you choose to make video calls!
NEGOTIATE EVERYTHING
However big or small a purchase is, you should always try to negociate everything to get the best deals. Even
when it doesn’t seem like much, saving on every single purchase can make a considerable difference at the end
of the month.
BANKING
If you choose to go with a high street bank, there are considerable savings to be made by choosing the offering
carefully. Most banks will nowadays offer a free 12 to 24 months period. Beware of the fees after the initial
period. The annual cost can then reach hundreds of pounds.
There are however alternative finance providers such as www.apsgroup.com that offer similar business bank
accounts at a fraction of the cost with immediate approval, which means you won’t have to go through any credit
checks.
OUTSOURCE
As a new business owner, you will probably try to do just about everything. Don’t. Instead, focus on what you are
good at and outsource the rest. Companies experienced in other areas will do a better job than you, quicker and
probably cheaper than you would once you take your time into consideration.

12. FREE APPS, WEBSITES & HOSTING
Make the most of all the free resources available on the Internet. Don’t pay for anything unless you really have to.
There are several companies offering free hosting for start-ups Rackspace, Google cloud and Microsoft BizSpark
are just a few of them.
APPRENTICESHIPS & INTERNSHIPS
These can be a goldmine to any business. Many very talented individuals will be willing to join a fun, fast pace
company at the start of its journey for its working environment and the long term prospects it offers.
SMALL ACCOUNTS
You are a small business who only has limited accountancy needs.A cheaper , small accountant is all your
business needs at present. Don’t spend unnecessary cash on big accountancy firms until you have a need for it.
GRANTS
Grants are not always easy to obtain and competition can be fierce, but they are well worth the reward. Look out
for grants in your area and apply to as many as you can. This extra cash will no doubt be very welcome, it may
also help push your business to the next level.