Funding for starting a business in the UK

When starting your own business in the United Kingdom, it is worth being aware of the costs you will face at the outset. To reach a broad base of customers and build a strong market position, you will need to take the right steps, but also to make quite a few investments, including in supplies, putting together the equipment needed for the job, hiring staff, and marketing. Right from the start, a good business plan will come in handy, making it easier to allocate funds and keep ongoing control of spending.

Summary & key takeaways

Business grants in the UK come from government, local and private schemes.
Each grant has its own conditions, and not all are open to brand-new businesses.
Grant amounts often match the owner's own contribution.
Innovate UK awards innovation grants from £25,000 up to £10 million.
A Start Up Loan lends £500 to £25,000 at a fixed 6% annual interest rate.

But where do you get the necessary funds? Business owners most often reach for their own savings or bank loans, but grants for starting or running a business may also be within reach.

Who can get business funding in the UK?

There are many schemes in the United Kingdom offering business grants, including government ones as well as local schemes and those run by specific institutions. It is worth being aware, however, that they are not available to every business owner - every form of funding has specific conditions that must be met before the money can be awarded.

Importantly, not all existing schemes are open to people who are only just starting their business. Why? Stiff competition and poor management mean that many such companies struggle to stay afloat - a good number of them fold within the first year of trading - which means subsidising them can be seen as a higher risk and a poor investment.

What business funding is available in the United Kingdom?

In the UK, business support can take the form of free training and advice, but also grants, that is, non-repayable financial help. These may be services provided by national and local authorities, private companies or charities, and the options available, and their scope, can vary depending on the business, the sector, or even the company’s location.

A common rule is also to match the size of the grant to the size of your own contribution; for example, where a business owner has £1,000, they can apply for a grant equivalent to that amount.

Starting a business in the UK - funding

Grants for starting a business in the UK may be available under national and regional schemes, and the scope of the support on offer depends on the business owner’s individual situation. Examples of funding include:

The Prince’s Trust: Offers support for people aged 18 to 30 who want to start their own business. The options available include vocational training, advice on running a business, and grants such as the Test My Business Idea Grant and the Start Up Grant.
Access to Work: Offers support, including advice and grants, for people who need help doing their job or getting to their place of work because of a health condition. The help is also available to the self-employed.

Grants for businesses

Non-repayable grants in the UK are most readily awarded for innovation and new technologies, but also for investment in developing and improving businesses and creating new jobs. For example:

Innovate UK: Supports companies working in innovative areas relating to, among other things, new technologies, artificial intelligence, and environmental protection. It awards grants from £25,000 up to as much as £10 million, available to small and large companies that meet the scheme’s conditions.

How do you get funding to start your own business in the UK?

The first step is to find funding that suits your situation and the type of business you run or are setting up. The government provides free advice through the Business Support Service, and you can also look for information on current schemes at the local council for the area where your business operates, or through trade organisations.

Once you have found the right funding for you, you should:

read all the requirements carefully,
make sure the necessary documentation and information are prepared,
fill in the application - before submitting, it is worth double-checking that all the details are correct and truthful,
stick to the application deadlines.

Applying for funding can be a time-consuming and complicated task, given the conditions to be met and the documentation to be prepared. Before starting the process, it is therefore worth checking carefully whether support is actually available in your case. Discussing the matter with a financial adviser can help too.

Business loans in the UK: the basics

Various types of loans are available to businesses in the United Kingdom, including bank, government, and private ones. Their details, such as the conditions and the amounts available, depend on the offer and the company’s situation. Worth mentioning are, for example:

Start Up Loan: Government-backed loans for starting or growing a business, with a fixed interest rate of 6% a year. They allow you to borrow from £500 to £25,000, with up to 5 years to repay. The loan comes with help writing a business plan and up to a year of free mentoring.
Business Overdraft: This is a quick and relatively easy type of funding to obtain, which works on similar principles to an unsecured loan. It gives the company access to additional funds up to an amount agreed with the bank, which helps in emergencies or with temporary cash-flow problems. A big advantage is that interest charges only apply to the funds actually drawn, not the entire amount available.