News article

1. Bank loans and overdrafts

Traditional bank loans and overdrafts are common choices for established businesses with a strong credit history. They offer predictable repayment schedules, and if you have an existing banking relationship, it might be easier to secure funding. However, be prepared to provide collateral, as banks often require security for loans. Tip: Overdrafts are usually short-term and can be more expensive than loans, so they are best for temporary cash flow gaps.  

2. Alternative debt finance

If traditional loans are not available or suitable, alternative lenders, including FinTech companies, offer another route. These lenders provide quick, accessible loans, often without the need for physical collateral. Keep in mind that they may charge higher interest rates, and your business usually needs at least two years of trading history. Tip: Some lenders accept less than two years of trading if revenue is strong, so check eligibility criteria carefully.  

3. Community Development Finance Institutions (CDFIs)

CDFIs offer loans specifically to small businesses and social enterprises that may not qualify for traditional bank loans. They take a detailed look at your business to understand your potential and offer loans of up to £250,000. While interest rates may be higher, CDFIs can be a good fit if you are looking for a supportive lender that values social impact. Tip: Many CDFIs also provide business advice and mentoring alongside funding.  

4. Revolving credit

Revolving credit provides a flexible way to access funds up to a certain limit, allowing you to borrow, repay, and borrow again. This is ideal for managing cash flow fluctuations, as you can draw down only what you need, when you need it. Unlike credit cards, revolving credit does not come with a payment card; funds are transferred to your business account. Tip: Some revolving credit facilities do include cards (similar to business credit cards), so confirm the structure before applying.  

5. Asset finance

Asset finance helps you acquire equipment or machinery without paying the full cost upfront. Options like hire-purchase and leasing allow you to use the asset while making regular payments, with the borrowing secured against the asset. Asset finance is ideal for businesses that need specific equipment but want to keep their cash flow steady. Tip: There are different types of leases—finance leases and operating leases—so choose the one that best fits your tax and ownership goals.  

6. Invoice financing

Invoice financing is designed to bridge the gap between issuing an invoice and receiving payment from your customers. With invoice factoring, the finance provider manages collections from your customers, while with invoice discounting, you retain control of customer relationships. Both options improve cash flow by providing quick access to funds tied up in unpaid invoices. Tip: Factoring can affect customer perception since the lender contacts them directly, so consider how this impacts your brand.  

7. Crowdfunding

Crowdfunding leverages the power of the crowd to raise funds. There are three types:

• Donation-based crowdfunding – Supporters donate without expecting anything in return.
• Reward-based crowdfunding – Backers receive a reward, such as a product sample.
• Equity crowdfunding – Investors receive shares in your business.

Crowdfunding is best suited for businesses that can offer compelling stories, unique products, or a strong community appeal. Tip: Equity crowdfunding in the UK requires compliance with FCA regulations, so factor in legal and administrative costs.  

8. Business angels and venture capital

Angel investors and venture capitalists (VCs) provide funding in exchange for equity in your business. They are often highly engaged, bringing expertise and connections alongside their investment. However, they expect significant returns and a clear exit strategy, so this route is ideal if you have big growth ambitions and can scale quickly. Tip: Angels typically invest earlier than VCs, often at seed or pre-seed stages, while VCs focus on later-stage, high-growth businesses.  

9. Grants

Grants are a fantastic option if you can secure them since they do not need to be repaid. However, they are often competitive, with strict application processes and specific criteria. Grants are generally geared toward innovation, expansion, or social impact. They can require significant documentation, so be prepared to demonstrate a clear benefit or “step change” to your business operations. Tip: Grants rarely cover 100% of costs—they often require match funding, so plan for additional resources.     

10. Conclusion

Choosing the right option for your business When selecting a financing option, consider your business’s current needs, growth goals, and cash flow situation. Think about: Repayment terms and interest rates – Will the monthly payments work with your cash flow? Collateral – Are you willing to provide security for a loan? Equity considerations – If giving up some ownership is acceptable, equity financing may be worth it. Flexibility – Do you need funds immediately, or can you wait for a competitive grant? Financing can feel complex, but knowing your options can empower you to make the best choice. With the right funding, your business can achieve its growth ambitions and take on new opportunities.