Pros and cons: 10 ways to fund your small business

Around 58% of small-to medium-size enterprises (SMEs) in the UK are currently using some form of external finance to fund their business. Moreover, according to a small business report by peak b, 42% of businesses do not feel they have sufficient access to finance.

Knowing what options are available can give you the confidence to reach out for funding when you need it, enabling you to start or grow your business more efficiently and stay competitive in the marketplace.

In this post, we’ll look at 10 ways to fund your business, including pros and cons for each, so that you can make an informed decision about which type of finance is right for you.  

Table of contents

Start with a solid plan

Nine of the ten funding options we’ll discuss in this post are external finance, which means sourcing capital from outside your company. 

External finance comes in two forms: 

  • Debt finance: Borrowing money from a lender who needs to be repaid (e.g. loans, credit cards and grants)
  • Equity finance: Selling shares in your business (e.g. angel investment, venture capital and crowdfunding)

With every type of external finance, you’re asking someone to trust your business. That trust needs to be earned by showing the lender or investor that you’re a safe bet who can pay back what you’ve borrowed or offer a return on investment. 

For this reason, it’s important that you have your finances in order, know how much you need to borrow and have a solid business plan in place that details:

  • How your company will be successful
  • How you’ll use external finance 
  • How you’ll repay debt, or provide a return on investment and buy back shares

Getting your accounts and costs in order ensures you’re not over or under borrowing, while your business plan helps lenders and investors make informed, calculated decisions.

To help you further with this, we’ve created the following guides: 

The non-external finance option that we’ll discuss in this post is bootstrapping, which involves proceeding without outside funding.

This option doesn’t require you to work out costs or put together a business plan for any external funding, however, it’s best practice to plan for external funding as a fail-safe and to keep your finances in check and your business on the right path.

With your plan laid out, let’s look into 10 ways to fund your business:

1. Government Start Up Loan 

Start Up Loans are government-funded personal loans provided by the Start Up Loans Company and designed to help new businesses get started. Since 2012, they’ve provided funding to over 65,000 business ideas

The loans were originally created to give new business owners who would have otherwise struggled to get finance from a traditional lender (i.e. a bank), access to funding.

However, you don’t need to have tried elsewhere before approaching the Start Up Loans Company for finance. In fact, given the low fixed interest rates and benefits on offer, this is a good first port of call for anyone seeking a business loan for the first time. 

The Start Up Loans Company lets borrowers access between £500 and £25,000 (the average loan amount is around £8,000), payable over one to five years at a fixed interest rate of 6% per annum. As it’s a personal loan, all owners or partners within a business can apply, with a maximum of £100,000 available per business.

Graphic showing Start Up Loans Company's achievements
A snapshot of the Start Up Loans Company’s achievements as of July 2020, source: Start Up Loans Company

Start Up Loans eligibility

To qualify for a Start Up Loan you’ll need to:

  • Be aged 18 or over
  • Live in the UK
  • Have the right to work in the UK
  • Be starting a new business or own a business that is less than two years old
  • Have your business based in the UK

As part of your application, you’ll also need to submit a business plan and cash flow forecast that explain your intentions for the loan and how the money will help start and/or grow your business. 

The Start Up Loans Company offers free templates to help you create a business plan, cash flow forecast and personal survival budget that can be used as part of your application. You’ll also be assigned a business adviser to help you complete the process. And if your application is successful, you’ll be paired with a business mentor for 12 months of free mentoring.

Quick-tip: To learn more about how a cash flow forecast can help you make strategic business decisions, read our guide to cash flow forecasts. You can also download and use our free cash flow forecast template to get a feel for how forecasting works. 

Pros and cons of Start Up Loans


  • Retain full control of your business: Unlike equity finance, a loan doesn’t require you to give up a stake in your company.
  • Unsecured loan: You don’t need to provide any assets (e.g. equipment or a company vehicle) as security.
  • Flexible repayment terms: Being able to pay over one to five years means you can keep monthly repayments manageable.
  • Fixed interest rate: The set interest rate of 6% per annum means there are no unexpected changes in monthly repayments. 
  • Support throughout the application process: Having a personal adviser ensures the right information is provided and each stage is completed correctly.
  • Free mentoring: Being able to call upon a mentor for advice and support can be vital in helping you navigate the tricky first months in business.    


  • Not suitable for everyone: Your business needs to be less than two years old and you need to meet the eligibility criteria.
  • Loan amount may not be sufficient: Start Up Loans are capped at £25,000 per person. Depending on your costs, you might be required to seek additional finance elsewhere.
  • Personal credit checks: A personal credit check will be carried out when you apply for a loan. This could impact your credit report. As the loan is a personal loan, any default on payment will likely affect your credit rating. 
  • Default charges: The Start Up Loans Company works with finance providers to provide loans. Depending on the provider, you may be charged for defaulting on your loan repayments. You’ll be personally liable for these charges and non-payment could result in a county court judgement (CCJ) or your debt being referred to a debt collection agency.

2. Business bank loan

According to British Business Bank, around 30% of SMEs currently use a bank loan or overdraft to finance their business.  

Bank loans can be sought from a high-street bank (e.g. Lloyds TSB, RBS, Santander, HSBC, Natwest, Barclays and Halifax) or a so-called ‘challenger bank’ — a smaller, recently launched bank that aims to challenge the high-street banks. 

Bank loan amounts and terms vary widely depending on the lender and it’s possible to borrow anything from £500 to £5 million over anywhere from one month to 30 years. Interest rates on the best bank loans available in the UK according to range from 7.4% per annum to 12.4% per annum. 

Typically, the shorter the terms of the loan, the higher the interest and monthly repayments.

Business loans, like personal loans, are offered as secured or unsecured:

  • Secured loan: You’ll need to offer security in the form of an asset such as property, equipment or stocks and shares that can be seized and sold to cover repayments if you’re unable to pay.

  • Unsecured loan: You borrow without using any business assets as security. Although, you may need to provide a personal guarantee that says you’ll pay back the loan if your business can’t. 

Because unsecured loans are a higher risk for the lender, interest rates are typically higher.

Bank loan eligibility

Each bank has its own criteria that determines who they lend to, but there are some common eligibility requirements. You’ll need to:

  • Be based in the UK
  • Show that you can pay back the loan (your business plan is important here)
  • Have no outstanding CCJs or late payments
  • Have a good business and personal credit report

If either your business or personal credit score is poor, you may find it more difficult to secure a bank loan on the terms you hoped for. You can check your business and personal score for free using a website like Experian. It’s worth doing this before making an application, as credit checks can impact your credit score.

The best business loans can be found using an independent comparison website like Money Facts.

If you’re a new business and unable to provide the security needed for a bank loan, you may be able to secure finance through the Government’s Enterprise Finance Guarantee (EFG) scheme. The scheme is run by the British Business Bank and provides a government guarantee for 75% of the value of a loan between £1,000 and £1.2 million.  

To be eligible for support via EFG, British Business Bank says your business must:

  • Be UK based, with a turnover of no more than £41 million per annum
  • Operate within an eligible industrial sector (a few industrial sectors are not eligible for support)
  • Have a sound borrowing proposal but have inadequate security to meet a lender’s normal requirements
  • Be able to confirm that they have not received other public support of de minimis state aid beyond €200,000 equivalent over the previous three years

Pros and cons of business bank loans


  • Retain full control of your business: You’re not required to give up shares in your company
  • Flexible repayment terms: You can choose a repayment schedule that suits your business
  • Fixed repayment rates: With locked in terms you know exactly how much you’re paying each month
  • Access to the finance you need: Bank loans range from hundreds to millions of pounds meaning you can get the funds you need from a single source 


  • Assets as security: Any assets that you use as security will be at risk if you default on a loan
  • Bank charges: Late or missed payments are typically subject to a fee that will increase your monthly repayment
  • Personal and business credit checks: Banks will carry out checks that may impact on your credit report. If you get a loan and default on payments both your personal and business credit ratings may be affected. 

3. Business credit card

According to British Business Bank’s Business Finance Survey, 36% of SMEs used credit cards in 2019, making it the most popular type of external finance.

Business credit cards work in the same way as personal credit cards, except that the card is in your company name and separate from your personal finances. A business credit card is also based on your company income, rather than your personal income, which usually means you can borrow more. 

Like business bank loans, credit card interest rates and limits differ widely with the most favourable terms offered to those with good business and personal credit scores. The larger your profits and the longer you’ve been trading, the more likely it is that you’ll be trusted with a higher credit limit and lower interest rate.

According to Money Facts, most business credit cards have a grace period of between 45 and 59 days in which to repay purchases made without accruing interest. As with a personal card, it’s a good idea to pay your bill in full each month to avoid interest and improve your chances of having your credit limit increased. 

You can use an independent comparison site like Money Facts to find the best business credit card offers. The key things to look for when comparing are the APR and the annual fee you’ll have to pay. Some providers don’t charge an annual fee, while others charge up to £125.

Business credit card eligibility

Each lender has its own eligibility criteria, but there are common requirements. To apply for a business credit card you must:

Some credit card providers will also require you to bank with them to be eligible for a card. Others will only offer cards to business with a turnover above or below a certain level.

Pros and cons of business credit cards


  • Retain full control of your business: You’re not required to give up shares in your company
  • Managing cash flow: A credit card can be used to pay for things while waiting for money to come in. For example, you may put additional stock on your credit card while waiting for a client to clear an invoice.
  • Emergency cash: Credit cards give you access to immediate funds in the event of an emergency. For example, equipment or vehicle repairs.
  • Attractive perks: Credit cards offer benefits that loans don’t, such as cashback on purchases, free travel insurance, 0% interest periods and reward points
  • Additional cards: Most lenders offer extra cards that can be issued to multiple staff to pay for expenses


  • May not be available to new businesses: Most credit cards are only offered to businesses that are already trading. If you’re seeking funds to cover start-up costs, a loan or investment is a better option.
  • Potentially high-interest rates: Many credit card providers offer attractive introductory rates, but these can rise dramatically after the period (usually 12 months) has ended. You do have the option to switch to a new provider once introductory terms end but look at full interest rates when comparing to avoid any surprises.
  • Cash withdrawals are expensive: Most credit card providers charge a fee for withdrawing cash from ATM points 
  • Annual fees: Many credit card providers charge an annual fee for each card you have

4. Small business grants

Multiple schemes across the UK offer grants to new businesses in all industries and this funding source accounts for around 2% of the finance currently in use by SMEs

The obvious benefit of a grant is that its money you don’t have to pay back. Depending on the grant, there may be restrictions on how the money can be used, but most investments around starting and growing a business are allowed. However, they’re not always easy to come by.

Grants aren’t always well publicised, so you’ll need to do some research by contacting your local council or by searching through GOV.UK’s finance and support database. Information can also be found on country-specific grant websites: 

Infographic outlining UK councils that offer business grants
UK business grants by district, source: UK Domain

Some well known, UK-wide grant providers include: 

  • Innovate UK: Offering government grants to “develop and realise the potential of new ideas, including those from the UK’s world-class research base.”
  • The Lottery Heritage Fund: Providing funding of between £3,000 and £250,000 for heritage projects of all sizes including nature, landscapes, countryside, archaeology, oral history, museums, libraries and more      
  • The Prince’s Trust: Offering grants to young people aged 18 to 30 to start and run their own business. Prince’s Trust grants have helped over 86,000 young people get started in self-employment.
  • New Enterprise Allowance: An allowance of up to £1,274 and mentoring for people looking to move from benefits to work
  • Research and development tax reliefs: Government support for businesses that work on innovative projects in science technology in the form of Corporation Tax relief

Business grant eligibility

Each grant provider has strict criteria for who is eligible for funds. In all cases, though, you’ll need a detailed business plan that shows your idea is worthy of investment.

Pros and cons of business grants


  • Money you don’t have to pay back: A grant provides funds without requiring you take on debt or give up a stake in your business
  • Free mentorship: Most grants come with access to advice and support from business advisers who can help you start and/or grow your business
  • Enhanced credibility: Receiving a grant shows people that you have a business that’s worth investing in. Grants from schemes such as The Prince’s Trust and Lottery Heritage Fund are trusted and respected.


  • Limited funds: Grant providers have limited funds that are distributed across multiple businesses, meaning you may not get the full amount of funding you’re looking for
  • Strong competition: According to the Society of Non-profits, around 2,700 grant proposals are submitted every day and fewer than 200 of these will receive funding 
  • Restrictions on spending: Most grants come with rules on what you can and can’t spend the money on
  • You may need to match investment: Some grants are only offered on the basis that you invest the equivalent amount into your business. For example, if you’re given a £5,000 grant, you’ll need to have £5,000 to invest.     

5. Business overdraft

In 2019, a quarter of SMEs used a bank overdraft to fund their business. Overdrafts on a company bank account work in the same way as they do on a personal account. You agree on a set limit with your bank and can draw on it anytime you need extra funds. 

They’re a useful way to manage cash flow and handy to have for day-to-day expenses or emergencies, but you shouldn’t rely on it as a long-term funding solution. As there is interest as well as fees to pay when using an overdraft, a loan is a more affordable option for larger purchases. 

How much you’re allowed to borrow on an overdraft depends on the health of your business bank account. The better your finances and stronger your credit rating, the more likely it is that you’ll get the size of overdraft you need. You can increase or decrease your overdraft limit to suit your needs subject to bank approval. 

Interest on overdrafts is typically charged on the amount borrowed and calculated daily. To keep costs down, you should always try to get back into the black as soon as possible. Some banks offer interest-free overdrafts for limited periods (usually up to 12 months). These are worth taking advantage of, but you need to be aware of the charges that will be introduced once the period ends.   

Fees differ depending on the bank, but usually include:

  • Arrangement fee for setting up the overdraft
  • Change fee for changing the overdraft limit
  • Renewal fee charged annually for renewing the overdraft facility
  • Unarranged overdraft fee for going over your set overdraft limit

Business overdraft eligibility

As well as reviewing your credit history, before accepting an overdraft application a bank may ask you to:

  • Outline how you’ll repay your overdraft
  • Provide an asset (e.g. property or equipment) as security

You’ll also need to hold a business account with the bank or be willing to open one. 

Pros and cons of business overdrafts


  • Flexibility: You only borrow what you need when you need it
  • Retain full control of your business: You’re not required to give up shares in your company
  • Managing cash flow: An overdraft can be used to pay for things while waiting for money to come in
  • Emergency cash: Like a credit card, an overdraft gives you access to immediate funds in the event of an emergency


  • Fees and charges: Banks charge for extending your overdraft or exceeding your limit without authorisation
  • Repayment on demand: Banks have the right to ask for repayment of your overdraft at any time
  • Credit record: Going over your authorised overdraft limit can impact your credit record
  • Overdraft reduction: Banks can reduce unutilised overdrafts at short notice
  • High-interest rates: Interest rates for overdrafts tend to be higher than loans or credit cards

6. Crowdfunding

Crowdfunding works by pitching your business idea to consumers or investors and giving something in return for their investment. 

It is described by UK Crowdfunding as “a way of raising finance by asking a large number of people each for a small amount of money.”

There are different types of crowdfunding you can use depending on what kind of investment you’re looking for and whether you’re willing to give up shares in your company. 

  • Donation or reward crowdfunding: Made popular by platforms like IndieGoGo and Kickstarter, this type of crowdfunding focuses on rewarding financial backers, usually with a product. For example, one of the most successful Kickstarter campaigns of all time was the Pebble Time smartwatch, which earned over $20 million from 78,471 backers, despite having an initial goal of $500K. In exchange for their pledge (investment), backers were given the chance to be among the first to own or distribute the watches. It shows that people are willing to get behind great ideas when those ideas resonate. 

Screenshot of Pebble Time's Kickstarter campaign
Pebble Time Kickstarter campaign, source: Kickstarter

  • Investor crowdfunding: Also known as equity crowdfunding, this method works by turning backers into shareholders. This is a better option for new businesses without a product or businesses that want to raise larger amounts of funding. A good example of this type of crowdfunding in action is plant-based burger company, The Vurger Co., who used Crowdcube to raise almost £300,000 from 275 investors and grew from a small market stall to operating pop-up restaurants and catering at festivals. As well as Crowdcube, Seedrs is a popular equity crowdfunding platform.

You can find out more about how crowdfunding works through the UK Crowdfunding Association (UKCFA) website.

Crowdfunding eligibility

Crowdfunding is open to anyone in need of business funding. But the money raised must go towards your business. 

Each crowdfunding platform also has its own rules and guidelines. 

Pros and cons of crowdfunding


  • Good alternative to traditional finance: If you’re unable to get a loan or credit card, crowdfunding can help you raise the funds you need
  • Build a loyal following: Investors can become loyal customers and help your business hit the ground running
  • Set how much you need: You get to set your own funding targets
  • Fast way to raise funds: If your idea captures the attention of investors, it’s possible to get the money you need in days. For example, the board game Exploding Kittens exceeded it’s $10,000 goal in eight minutes and went on to raise over $8 million.


  • No guarantee of raising the funds you need: If you don’t reach your funding target, money may have to be returned to investors
  • You’ll give up some control of your business: Equity crowdfunding will mean giving up shares in your business and shareholders will need to be consulted before any major business decisions are made 
  • Relies on marketing: A successful crowdfunding campaign requires a lot of work to drum up attention and get people excited enough to invest. This can take up a lot of time and money.    

7. Peer-to-peer business loans

Peer-to-peer (P2P) business loans are another form of crowdfunding. But rather than offering rewards or giving up equity, you’re borrowing money from multiple investors that will be paid back with interest. 

P2P loans are a new alternative to traditional bank borrowing that match borrowers with lenders via online platforms. 

The way it works is simple: you complete an online form with details about your company, then answer some questions about the size of your loan and what you’ll use it for. The platform will then decide whether you’re eligible for the loan and you can have the full amount of money you need within days. 

How much you can borrow depends on the platform you use, but here are some figures from three of the UK’s most popular P2P platforms: 

  • Funding Circle: Unsecured loans of up to £250,000.
  • RateSetter: Personal loans of up to £25,000, dealer finance of up to £500,000 and property finance of up to £10 million
  • LendingCrowd: Unsecured loans of up to £500,000

Loan terms will differ depending on whom you get a loan from but tend to range from one month to five years, with interest rates based on the strength of your credit rating. The better your rating, the lower the interest.

Peer-to-peer loan eligibility

Each platform or broker sets its own criteria, but you will need to be the business owner or a registered company director. You may also need:

  • A minimum annual turnover (e.g. over £100,000)
  • Up to date accounts
  • Details of assets

Pros and cons of peer-to-peer loans


  • Simple process: It’s possible to apply and get a decision on a P2P loan in as little as 10 minutes
  • Retain full control of your business: You won’t need to give up equity in your company
  • Quick access to finance: Most P2P platforms deposit funds into your account within 48 hours
  • Get as little or as much as you need: P2P lenders cater for small and large loans, allowing you to secure the exact amount of finance from a single source
  • Unsecured loan: Most P2P loans are unsecured so you won’t need to offer assets as security


  • Personal and business credit checks: P2P platforms will carry out checks that will have an impact on your credit report. If you get a loan and default on payments both your personal and business credit ratings may be affected.
  • Potential arrangement fees: Some platforms charge fees for arranging loans
  • High-interest rates: Because most P2P loans are unsecured they often have higher interest rates than bank loans. Rates can also increase dramatically depending on the strength of your credit profile. 

8. Angel investment

Angel investors are experienced and successful investors who invest money in businesses in exchange for a stake.

If you’ve ever seen the television show Dragon’s Den you’ll be familiar with how angel investment works: businesses owners pitch their business to angels. If an angel feels that the business is worth investing in, they’ll offer up some or all of the funding needed for a percentage (typically anywhere from 2% to 25%) of the company. 

Angel investment is a great way to secure a large amount of funding, but perhaps a bigger benefit is the mentoring, support and contacts you get from an angel.

While they generally won’t involve themselves in the day-to-day running of a business, an angel will invest time in helping you grow. According to the British Business Bank, the typical angel spends 1.6 days a week in a new business and holds their investment for six years. 

Table showing the profile of a typical business angel
Typical profile of an angel investor, source: British Business Bank

Angels can invest alone but tend to invest as a syndicate working together as a group to lend their capital and experience to a business. Where a syndicate is used, there will usually be a ‘lead angel’ who acts as the deal broker and main point of contact for your business. 

The British Business Bank says that angel investors usually offer £15,000 to £500,000 in finance, with some syndicates offering up to £2 million.

While investing in any business is a risk for an angel, they are helped by the government’s Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS), which give tax relief on investments.

Angel investment eligibility

Angel investment is open to anyone with a good business idea and potential for growth. But you will need to work hard to impress. 

Writing in the Financial Times, angel investors and business owners who have successfully secured investment gave their best tips for pitching:  

  • “Know your numbers inside out: Someone on the team must have a strong grasp of the profit and loss account, growth and margins.
  • Practise the pitch: It might be a painful process, but it is worth tuning and refining your presentation.
  • Demonstrate leadership skills: The ability to hire and inspire a team.
  • Be genuine: You need to establish a rapport with your prospective investors, and that is only achieved by being yourself.”

From the time you pitch an angel, it can take up to six months to get your finance.

Pros and cons of angel investment


  • No cost to your business: There are no fees or charges associated with securing angel investment
  • No repayments: You won’t have to repay the investment
  • Expert mentoring: You get access to experienced business professionals who can help your business grow
  • Enhanced credibility: Angel investment is a feather in your cap that can work in your favour when securing further investment down the line


  • You’ll give up equity in your business: The angel’s stake in your business will mean you’re not the sole owner of your company
  • Possible restrictions on how finance is used: Angels will have a say on how their investment is used. Typical uses include product development, increasing sales, building teams and entering into new markets.

9. Venture capital 

Venture capital (VC) is a step up from angel investment. 

Where angel investors invest their own money in a business, venture capitalists work on behalf of venture capital firms to invest money from multiple sources including corporations, individuals, public and private pension funds and foundations. 

They also invest larger amounts. Where some angel investment syndicates may start as low as £15,000 and go up to £2 million in investment, a VC firm investment isn’t likely to start at anything under £1 million. Because of this, VCs look for businesses with high growth potential, such as tech companies. 

VC funds tend to work in cycles of 5-10 years, with investment provided in rounds starting with a seed investment of several hundred thousands pounds, before moving onto A, B and C rounds of several or tens of millions. 

During these cycles, VCs will expect to see significant growth and return on investment. Like angel investors, VCs are also helped by the Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS), as well as Venture Capital Trusts (VCT) and the Social Investment Tax Relief Scheme (SITR)

As part of their investment in your company, VC firms will demand space on your board. This will give them a say in how your business is run and allow them to help you meet your potential. 

If you have plans for large growth over a short period, VC can provide the finance needed to achieve it. If your initial plans are more modest and your required funds aren’t as grand, angel investment is probably a better option.

Venture capital eligibility

VC firms will set their own eligibility criteria. According to Unbiased, to be eligible for raising funds through a VC scheme your company will need to:

  • Be based permanently in the UK
  • Not be on any recognised stock exchange
  • Have gross assets of less than £15 million

Some sectors including legal and financial services, property development and coal or steel production may be excluded from VC funding.

Pros and cons of Venture capital


  • Access to a large amount of capital: VCs offer significant capital that can be used to accelerate growth
  • Expert guidance: VCs invest in helping your business grow and provide the advice and experience to support you
  • No cost to your business: There are no fees or charges associated with securing angel investment
  • No repayments: You won’t have to repay the investment


  • You’ll give up equity in your business: VC investment will dilute the number of shares you hold
  • No guarantee of growth: While you’ll have the best possible chance of growth, there are no guarantees that you’ll succeed 
  • Strong competition: Investment depends on the economic climate. When large sums of money are available, they tend to be in high demand. There’s also a chance that VCs aren’t investing funds when you need them. 
  • May not be suitable: Trying to scale fast can be detrimental to some companies. You’ll need to be market-ready with a fully developed product or service.   
  • Pitching is tough: According to Chris Steinau, an investment manager at VC firm Northzone, of more than 1,000 pitches they see each year only 10 win investment. You’ll need a solid business plan, well-honed pitch and lots of persistence to succeed.

10. Bootstrapping

We’ve arrived at the one funding option in the list that doesn’t involve external finance. Bootstrapping is about going it alone and funding your business using existing resources such as personal savings. 

Of the SMEs surveyed by the British Business Bank, 72% of businesses that started in the last five years used personal savings to finance their venture.

Bootstrapping is an approach that has worked for some of the biggest companies in the world. Apple, Patagonia, GoPro and Spanx were all started by founders working for themselves at home and have all grown to become $1 billion companies. 

If you’re a small business providing a product or service that allows you to start small and use money earned from sales to reinvest in your business, bootstrapping may work for you too. However, it’s essential that you keep overheads low and avoid splurging on anything unnecessary in order to have enough revenue to reinvest in your business.

Pros and cons of Bootstrapping


  • You retain full control of your business: You allocate money and decide which areas of the company are most important
  • Reinvesting profits: With no loan or investment to repay, you can pump any money that you earn back into the business to help it grow


  • Personal risk: The financial burden is on you. If the company fails, you’re left with its debt 
  • Slower growth: The funds at your disposal will determine how much you’re able to invest in things like stock, product development and marketing. If money is tight, growth may be hampered.    
  • Lack of outside expertise: Bootstrapping means missing out on the expertise of investors and mentors who can help you identify growth opportunities and scale your business. However, it is possible to find free business advice and support through GOV.UK.    

Wrapping up

Not every option will be right for your business and you may need to pursue more than one type of finance to secure the full amount of finance required. But knowing what’s available can help you plan for growth and put the resources in place to achieve it.

Before pursuing any of these funding options, weigh up the pros and cons and have your costs, cash flow forecast and business plan ready before submitting an application.

Lenders and investors want to see how you can repay their investment and these documents are essential in positioning you as a safe bet.

Photo by Micheile Henderson, published on Unsplash

Valentine Hutchings

Valentine Hutchings

Head of Community and small business enthusiast

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