Seven ways to get startup funding in the UK

Between loans, investors, grants, and angels, identifying the best type of funding for your startup is crucial to its success

You’ve done it: You’ve come up with your revolutionary idea, quit your day job, and launched your own business. But to quickly grow your fledgling startup into a full-scale company, you’re going to need funding, and between loans, investors, grants, and angels, it can be tough to know where to look for that all-important cash injection. Let’s take a look at seven ways to get startup funding in the UK.

1. The government’s Start Up Loan scheme

Launched in 2012 to encourage entrepreneurship, the Start Up Loan scheme is a government-backed personal loan of between £500 and £25,000 available to anyone looking to launch or expand a small business. The interest rate is fixed at 6 percent per annum, and the loan can be repaid over one to five years.

You’ll need to submit a detailed business plan and cash-flow forecast to prove that your startup can afford the monthly repayments—there are plenty of helpful guides on the Start Up Loans website to help you—and if you’re accepted, you’ll be paired with a business mentor for 12 months.

2. Finding a small-business grant

There are a few startup-business grants available to new UK companies specializing in innovation across a number of fields, from technology to the arts. Innovate UK Smart Grants offer financial assistance to startups working on groundbreaking inventions with commercial potential, such as the numerous AI startups now booming in London. There are also regular competitions awarding funding to startups with game-changing ideas, which are all collated on the Innovate UK page

You should Google your local borough’s small-business grants schemes too, as many local authorities offer funding to startups launching in the neighborhood. For example, the Kent and Medway Business Fund offers 0 percent interest loans of up to £500,000 to eligible startups in certain regions.

3. Crowdfunding

This is one of the most popular ways to attract startup funding in the UK, with a range of platforms offering different models of investment. Crowdfunding gives startups an opportunity to not only simultaneously raise money and generate publicity, but also to gauge interest in a product and develop it as the business grows. Crowdfunding comes in two different flavors.

Consumer-focused crowdfunding

If your business is product-based, crowdfunding through platforms like Kickstarter and Indiegogo offers a way to ensure a healthy number of guaranteed sales before you even begin manufacturing. Not only does this give you the capital needed to get your startup off the ground, but when the investor’s reward is the product itself, you won’t have to give up shares in your company. 

Just make sure your pricing structure accounts for all of the hidden costs of producing and distributing your backers’ rewards.

Investor-focused crowdfunding

Platforms such as Crowdcube and Seedrs allow you to raise cash by turning your supporters into shareholders. This is great for startups with a  business that isn’t product-based, or for small companies that need to raise larger amounts of funding to expand. Investors on these platforms are given equity in your company, and so will likely invest more than a typical customer would.

4. Peer-to-peer business loans

When it comes to handing out loans, large banks are typically risk-averse. As such, they don’t readily provide startup funding to businesses that haven’t yet proved themselves. 

But other lenders aim to help young companies looking to expand. Funding Circle was the first peer-to-peer lender to launch in the UK and connects a small army of investors directly to new companies in need of cash: Qualifying startups are given easy access to unsecured business loans of up to £500,000. Zopa and RateSetter are similar peer-to-peer lenders.

5. Family and friends

One of the most reliable ways of raising startup funding is by calling upon the generosity of family and friends, but you should always be aware of the risks involved in taking investment from loved ones.

As common wisdom dictates, money problems between friends can spell disaster for your personal relationships if things go south. Your buddies are your biggest cheerleaders, and many will be willing to dig deep to fund your new business, but never take money from those who can’t afford to lose it or from anyone who doesn’t fully appreciate the risks involved.

6. Angel investors

Angel investors are wealthy individuals looking to invest in startups at their earliest stages. Many angel investors have launched a successful business of their own. While you can always approach an investor one-on-one, it’s usually a better idea to pitch your startup to an angel-investment network. Here’s a list of angel investment networks in the UK, each of which specializes in different areas, business types, and industries.

Face-to-face meetings are crucial to securing angel investment. WeWork members can benefit from networking with other companies in their offices, which provide valuable meeting spaces and a supportive environment at a critical point in a startup’s development.

7. Venture capital

A venture capitalist is an investor who funds small startups with very high growth potential. Almost every notable startup success story involves a VC, but this form of funding is rarer than most and usually only possible for companies that are expanding very quickly, or that have already had a round of seed funding from angel investors.

A venture capitalist also plays a large role in the operation of the company, becoming associates or partners. Understandably, many startups aren’t amenable to the idea of ceding a great deal of control over the direction of the company so early on, and courting this kind of investor can consume a huge amount of time and energy. The British Venture Capital Association provides a directory of venture-capital firms operating in the UK.

However you plan to fund your startup, WeWork London offers space and services for young companies poised to grow dramatically in the future. Plus, WeWork’s approach to agile real estate, including workspace flexibility, allows you to scale at your own pace—in UK and beyond.

For more articles about operating a business in Europe and around the world, check out our Cities + Travel section.

Steve Hogarty is a writer and journalist based in London. He is the travel editor of City AM newspaper and the deputy editor of City AM Magazine, where his work focuses on technology, travel, and entertainment.

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